Krugman on Greece? It's a Win / Win!
by
Published on 07-07-2015 07:55 AM
Part 1:
http://krugman.blogs.nytimes.com/201...gs®ion=Body
This just has all the makings of the perfect example of a good old fashioned Krugman mock.
And if Greece ends up exiting the euro? There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.
I know - bankers are evil, but just for a minute - think about what that actually says. And means.
Part 2 :
http://www.nytimes.com/2015/07/06/op...-bleeding.html
The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency.
Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.
And couple that with his conclusion:
And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding.
So, lending again with no fundamental changes to the Greek social system (which pays people to retire at age 55 at 96% of their final year's salary but doesn't require people to pay income taxes) will help Greece, even though their problem is directly related to irresponsible lending combined with irresponsible borrowing.
And fiscal democracy ftw.
I swear, he's an economic Kafka.