The world's largest economy - the U.S. - is contracting at an 'alarming rate' according to Paul Krugman, who has won this year's Nobel Economics Prize.
In a speech to a Copenhagen Business School audience, Krugman painted a bleak picture of the U.S. economy saying: "At a rough guess, the annual growth rate in the U.S. is currently minus 4-5 percent and unemployment is growing with almost 500,000 people each month."
"This will mean that 12 million Americans will be shoved under the poverty level," said Krugman as he foresaw current developments leading to 10 percent unemployment.
Krugman says a gigantic economic injection is necessary in order to turn the tide.
"I estimate that public spending will have to be increased by 600 billion dollars next year. This is some four percent of American GDP," he said adding that the financial crisis would be lengthy.
"Next year resembles hell. As does 2010. But hopefully, with good leadership, things will look better in 5 years time," he says.
Krugman, who receives the Prize in Economics in Memory of Alfred Nobel next week in Stockholm, is a well-known critic of President Bush's economic policies.
Edited by Julian Isherwood