Paul Krugman says he’s both terrified and bored by what’s happening in Europe.He’s terrified because a third of the countries in the Euro-zone are now “under speculative attack,” the Euro might collapse, and a Euro-collapse could cripple the entire world.
He’s bored because Europe’s leaders will probably find another boring way to just kick the can down the road instead of truly solving the problem. (They’re working on it.)
And Krugman’s not just terrified and bored, he’s also pissed–because Europe is not even talking about the one thing that he thinks could save everything: The abandonment of austerity in favour of a massive monetary and fiscal stimulus.
Without that, says Krugman, whatever can-kicking Europe does will fail, because an ongoing recession will continue to make countries’ budget problems worse.
Private spending is down because the debt-bubble has burst. Tax revenues are down because the economy is in the toilet. And public spending, meanwhile, is being cut back in the name of fiscal austerity.
Put all that together, Krugman says, and austerity just makes things worse.
Lastly, in a historical note that is, in fact, terrifying, Krugman observes that it was similar tight-money and insistence on budget-balancing in the early 1930s that made the Depression in Germany worse than it was elsewhere, thus paving the way for you-know-who to come to power.
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