Monday, April 20, 2015

Greece on the Brink

by Paul Krugman

New York Times

April 20, 2015

“Don’t you think they want us to fail?” That’s the question I kept hearing during a brief but intense visit to Athens. My answer was that there is no “they” — that Greece does not, in fact, face a solid bloc of implacable creditors who would rather see default and exit from the euro than let a leftist government succeed, that there’s more good will on the other side of the table than many Greeks suppose.

But you can understand why Greeks see things that way. And I came away from the visit fearing that Greece and Europe may suffer a terrible accident, an unnecessary rupture that will cast long shadows over the future.

The story so far: At the end of 2009 Greece faced a crisis driven by two factors: High debt, and inflated costs and prices that left the country uncompetitive.

Europe responded with loans that kept the cash flowing, but only on condition that Greece pursue extremely painful policies. These included spending cuts and tax hikes that, if imposed on the United States, would amount to $3 trillion a year. There were also wage cuts on a scale that’s hard to fathom, with average wages down 25 percent from their peak.


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