Paul Krugman has a reasonable explanation for what is going on in Greece and France where elections have changed the guard a day or so ago.
And his explanation highlights just how out of touch with reality the Harper government is with its own austerity plan, trying through slashing and burning to reduce in a hurry the deficits and debt increases brought about on its watch. A pity that Stephen Harper does not have the economic smarts of Paul Krugman, but dem's the breaks for a country with an archaic electoral system.
Things are much brighter for everyone today than they were a week or so!Europe’s voters, it turns out, are wiser than the Continent’s best and brightest.What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper. ..
Talk to German opinion leaders about the euro crisis, and they like to point out that their own economy was in the doldrums in the early years of the last decade but managed to recover. What they don’t like to acknowledge is that this recovery was driven by the emergence of a huge German trade surplus vis-à-vis other European countries — in particular, vis-à-vis the nations now in crisis — which were booming, and experiencing above-normal inflation, thanks to low interest rates. Europe’s crisis countries might be able to emulate Germany’s success if they faced a comparably favorable environment — that is, if this time it was the rest of Europe, especially Germany, that was experiencing a bit of an inflationary boom.So Germany’s experience isn’t, as the Germans imagine, an argument for unilateral austerity in Southern Europe; it’s an argument for much more expansionary policies elsewhere, and in particular for the European Central Bank to drop its obsession with inflation and focus on growth.The Germans, needless to say, don’t like this conclusion, nor does the leadership of the central bank. They will cling to their fantasies of prosperity through pain, and will insist that continuing with their failed strategy is the only responsible thing to do. But it seems that they will no longer have unquestioning support from the Élysée Palace.And that, believe it or not, means that both the euro and the European project now have a better chance of surviving than they did a few days ago.