Paul Krugman, New York Times: Greece Over the Brink
It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.
Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent’s most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors’ demands for harsh austerity, while the European Central Bank has managed to contain market panic.
WNU Editor: Aside the fact that his analysis on how Canada got out of its financial hole in the 1990s is wrong (I live in Canada so I know that it was not the low Canadian dollar that helped us but the federal government raising taxes and slashing its spending that changed the dynamics that resulted in budget surpluses) .... but Nobel Economic Prize laureate Paul Krugman is right on this point .... Greece has now gone over the brink. For someone who has valued the importance of government's need to accept debt .... this has probably been a philosophical problem for him .... and his proposed proposed solution for Greece reflects that. Unfortunately .... I do not see how his proposals .... if accepted ..... are going to solve their underlying economic/fiscal/debt problems. Leaving the Euro is a temporary measure .... but the problem has been, is, and will be the Greek government's inability and unwillingness to balance its books, further helped by Greek voters always voting in politicians with this mindset. The Greek political culture on how they view government money and debt and the role that they play in the economy has to change .... absent that they will just be like Argentina .... repeating the mistakes every generation and being the poorer because of it.