Paul Krugmans analyses of the rise of Syriza in Greece and function of debt and the Troika are relevant to our understanding of the aftermath of the sovereign debt crisis and the policies of austerity that have swept the European continent: European Commission bought fully into expansionary austerity; slashing spending wasn’t going to hurt the Greek economy, because the confidence fairy would come to the rescue. ... at this point Greek debt, measured as a stock, is not a very meaningful number. After all, the great bulk of the debt is now officially held, the interest rate bears little relationship to market prices, and the interest payments come in part out of funds lent by the creditors. In a sense the debt is an accounting fiction; it’s whatever the governments trying to dictate terms to Greece decide to say it is. ... although many of the press reports describe Syriza as “far-left”, it’s actually preaching fairly conventional economics, while the supposedly responsible officials of Brussels and Berlin have been relying on radical doctrines like expansionary austerity and a growth cliff at 90 percent. Oh, and unemployment was supposed to peak a bit under 15 percent, not hit 28. How did they get it so wrong? In the spring of 2010 both the ECB and the European Commission bought fully into expansionary austerity; slashing spending wasn’t going to hurt the Greek economy, because the confidence fairy would come to the rescue. The IMF never went all the way there, but it used an unrealistically low multiplier, which it arrived at by looking at historical examples of austerity while ignoring the difference in monetary conditions. The thing is, we now have essentially the same people who so totally misjudged the impacts of austerity lecturing the Greeks on the need to be realistic.
Posted on: Tue, 27 Jan 2015 12:57:02 +0000
Trending Topics
Recently Viewed Topics
© 2015