STOCKHOLM (AFP) - US economist Paul Krugman, a fierce critic of George W. Bush's handling of the global financial crisis, on Monday won the Nobel Economics Prize. The 55-year-old Princeton University professor has worked intensely on the impact of free trade and globalisation, as well as the driving forces behind urbanisation, the Nobel citation said. The financial turmoil that has sent shares crashing has cast a shadow over this year's prize and after his triumph, Krugman said he was "extremely terrified" by the crisis, Sweden's TT news agency reported. "I'm happier about it now than I was five days ago. I was extremely happy with the European summit yesterday, so I'm feeling better today, but it's still terrifying," he added. "I never thought I would see anything that looked like 1931 in my lifetime, but in many ways this crisis does," he added. A number of experts had predicted the crisis would prompt the Nobel committee to shift its focus away from liberal market theories now under increased attack because of the credit crunch. And by naming a critic of unfettered free market policies, the jury has decided to confront major, civilisation-changing issues. In columns for the New York Times, Krugman has been a harsh critic of the Bush administration's policies. He strongly opposed the initial wording of US Treasury Secretary Henry Paulson's 700-billion-dollar bank bailout plan " which he described as "financial Russian roulette" " although he conceded that a rescue was needed. On Sunday, he wrote admiringly of Britain's rescue scheme, buying stakes in troubled banks and extending huge guarantees, asking whether "Gordon Brown, the British prime minister, (had) saved the world financial system." "The Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn't been matched by any other Western govt, least of all our own," he wrote. While he has few kind words for the administration, which he has charged with engaging "in a game of deception" on Iraq and the economy, Krugman is even more sceptical of the Republican candidate in the current US election campaign McCain. In a recent column he stated that Democrat rival Barack Obama was "wrong to suggest that a McCain-Palin administration would just be a continuation of Bush-Cheney. If the way John McCain and Sarah Palin are campaigning is any indication, it would be much, much worse." The Nobel committee hailed Krugman's economic approach "based on the premise that many goods and services can be produced more cheaply in long series, a concept generally known as economies of scale." The theory shows that globalisation tends to increase pressure on urban living because specialisation sucks people into centres of concentration in which "regions become divided into a high-technology urbanised core and a less developed 'periphery'," the Nobel jury said. Traditional trade theory assumes that differences between countries explains why some nations export agricultural products while others export industrial goods. Such a process holds out the prospect that some countries can improve their situations through complementarity. But Krugman's "theory clarifies why worldwide trade is in fact dominated by countries which not only have similar conditions, but also trade in similar products," the Nobel jury wrote. His theory helps to explain that globalisation tends towards concentration, both in terms of what a manufacturing base makes, and where it is located. The Nobel committee has focused on an area of economic theory with deep implications for the understanding of how globalisation affects industries, populations, regions and the structure of trade, particularly in developing countries. Krugman has written dozens of books and several hundred articles, primarily about international trade and global finance and was known as creating so-called "new economic geography." In 1991, he received the 1991 John Bates Clark Medal, an award given every two years by the American Economic Association to an economist under 40. He will receive his Nobel gold medal and diploma along with 10 million Swedish kronor (1.42 million dollars, 1.02 million euros) at a formal prize ceremony in Stockholm on December 10. Speaking to Swedish public television immediately after the announcement, Krugman said the award "obviously will seriously warp my next few days." "I hope that two weeks from now, I'm back to being pretty much the same person I was before," he said. "I'm a great believer in continuing to do work. I hope it doesn't change things too much."