US risks lost decade due to half-steps,says Krugman

Were doing what the Japanese did in the nineties, he told a small group of reporters during a visit to Beijing. He said it was not clear that China would suffer sub-par growth as a consequence of the fallout of the present crisis.

Im mostly worried that the US and the euro zone will have Japanese-type lost decades, he said.

Krugman said he expected little or no employment growth this year or next in the United States,where the jobless rate in April hit a 25-year high of 8.9 percent.

A second stimulus is becoming clearly urgent. They need a very,very strong stimulus, said Krugman,a Princeton University professor and a New York Times columnist.

He said stress tests carried out on 19 leading US banks had bought time for the administration of Barack Obama,but they had not answered the key question of whether the banks have enough capital to fulfill their key role in the economy.

Its clear the administration wont take radical action to strengthen the banks any time soon, he said.