Thursday, December 29, 2011

European Fiscal Zombies

by Paul Krugman

New York Times

December 29, 2011

Dean Baker is unhappy at seeing yet another article asserting as fact something that is actually just something fiscal hawks imagine: the claim that Europe’s problem economies were running up government debt before the crisis.

Dean, this is a zombie; you can’t kill it unless you shoot it in the head.

Maybe the problem is that when Dean and I try to point out that Spain and Ireland don’t look anything like Greece, that’s just too complicated. So here’s another attempt: let’s construct an “average” troubled European government. I take debt to GDP from the IMF debt database, and weight the five GIPSI countries by their GDP in 2007. Here’s what I get:


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