What a good time to provoke another economic crisis
by digby
Krugman on the Euro-Greek talks falling apart:
OK, this is amazing, and not in a good way. Greek talks with finance ministers have broken up over this draft statement, which the Greeks have described as “absurd.” It’s certainly remarkable. On my reading, here’s the key sentence:
The Greek authorities committed to ensure appropriate primary fiscal surpluses and financing in order to guarantee debt sustainability in line with the targets agreed in the November 2012 Eurogroup statement. Moreover, any new measures should be funded, and not endanger financial stability.
Translation (if you look back at that Eurogroup statement): no give whatsoever on the primary surplus of 4.5 percent of GDP.
There was absolutely no way Tsipras and company could sign on to such a statement, which makes you wonder what the Eurogroup ministers think they’re doing.
I guess it’s possible that they’re just fools — that they don’t understand that Greece 2015 is not Ireland 2010, and that this kind of bullying won’t work.
Alternatively, and I guess more likely, they’ve decided to push Greece over the edge. Rather than give any ground, they prefer to see Greece forced into default and probably out of the euro, with the presumed economic wreckage as an object lesson to anyone else thinking of asking for relief. That is, they’re setting out to impose the economic equivalent of the “Carthaginian peace” France sought to impose on Germany after World War I.
Either way, the lack of wisdom is astonishing and appalling.
Oh heck, what really bad thing could happen? It’s not as if the world is suddenly looking very unstable in a number of different ways or anything. Obviously, it’s a perfect time to provoke a serious political and economic crisis in Europe for no good reason. What could go wrong?
Krugman’s column today was on this subject as well. Here’s the cheery intro:
Try to talk about the policies we need in a depressed world economy, and someone is sure to counter with the specter of Weimar Germany, supposedly an object lesson in the dangers of budget deficits and monetary expansion. But the history of Germany after World War I is almost always cited in a curiously selective way. We hear endlessly about the hyperinflation of 1923, when people carted around wheelbarrows full of cash, but we never hear about the much more relevant deflation of the early 1930s, as the government of Chancellor Brüning — having learned the wrong lessons — tried to defend Germany’s peg to gold with tight money and harsh austerity.
And what about what happened before the hyperinflation, when the victorious Allies tried to force Germany to pay huge reparations? That’s also a tale with a lot of modern relevance, because it has a direct bearing on the crisis now brewing over Greece.
The point is that now, more than ever, it is crucial that Europe’s leaders remember the right history. If they don’t, the European project of peace and democracy through prosperity will not survive.
Update: This op-ed by Greece’s finance minister Yanis Varoufakis in today’s NY Times is a must read if you’re looking for some context.
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