Noted economist has dire jobless warning

updated 3:56 p.m. ET Dec. 8, 2008

STOCKHOLM, Sweden - The U.S. unemployment rate could reach 10 percent without a "very effective" stimulus package, 2008 Nobel economics prize winner Paul Krugman said Monday.

Krugman, who will receive the award this week, also warned that the global economy could be stuck in recession for more than two years if no strong measures are taken.

"We could easily be looking at a world economy that is depressed until 2011 and maybe beyond," the Princeton University professor and New York Times columnist told reporters in Stockholm.

Krugman said the U.S. economy needs a stimulus package of at least $600 billion, or 4 percent of gross domestic product.

"That's actually modest," Krugman said. "That's not enough to prevent a further decline of the economy. It is enough to prevent a sharp decline."

He said as much of the recovery plan as possible should focus on infrastructure "because that at least will leave us with things of value afterwards."

Policy-makers need to take some chances, he said, "including chances of misspent money," to keep the crisis from evolving into another Great Depression.

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"We really are looking at what would very likely be a 10 percent, or plus, unemployment rate unless we can get a very effective stimulus package going," Krugman said. "The constraint now is what is actually feasible in terms of spending, rather than dollars and cents."

Krugman won the $1.4 million Nobel Memorial Prize in economics for his work on international trade patterns. Sweden's Carl XVI Gustaf will hand out the award, along with the Nobel Prizes in physics, chemistry, medicine and literature, on Wednesday.

The Nobel Peace Prize is presented in Oslo, Norway, according to the will of prize founder Alfred Nobel.

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