Paul Krugman: Wise Words On Europe


 Wise Words On Europe, by Paul Krugman, in NY Times: Kash Mansori has a very good piece on the eurozone crisis, making some points I’ve also tried to hit. Basically, he sees the peripheral countries mainly as victims of an overwhelming tide of cheap money from the core, who are now suffering whiplash when that inflow came to a sudden stop:

THE IMPLICATION IS that the very creation of the common currency area sowed the seeds for this crisis, not the behavior of the periphery countries. While these countries didn’t necessarily do everything right, they were playing against a stacked deck. But if the easy explanation for this crisis—namely, that it was due to the irresponsible behavior of the periphery countries—is not the right answer, then we need to reevaluate how it has been handled.

To start with, if the crisis is the result of inexorable forces beyond the control of the periphery countries, it’s not appropriate to wag fingers or punish those countries through the bitter medicine of insufficient assistance. This crisis should not be turned into a morality story.

But more importantly, since the periphery of the eurozone bore the bulk of the systemic risks inherent to the common currency area, while the benefits were shared by both the core and the periphery, it’s deeply unfair that the burden of solving the crisis has been placed so overwhelmingly on the periphery countries through the debilitating austerity measures demanded by the core countries. The core eurozone countries like France and Germany were in the driver’s seat when it came to setting up this system, and they were happy to take advantage of the common currency when it was to their benefit. They now need to recognize that the responsibility for fixing this mess should really rest largely with them.

A small niggle: does nobody in the modern era understand the difference between principle and principal? Or, for that matter, between periphery and peripheral?

Advertisements
This entry was posted in Paul Krugman. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s