Public Values

Euro crisis says nothing about sustainability of welfare state — Krugman

Euro-area countries 'subject to funding disruptions', lack of flexibility.

Krugman: The nations now in crisis do not have bigger welfare states than the nations doing well.November 10, 2011: Paul Krugman writes in the New York Times that the failure of the euro does not reflect on the success of the welfare state, as evidenced by Sweden, which spends more on social programs now than it did before the crisis began while raising its GDP in the same time period. Rather, Krugman blames the problem on borrowing in another country's currency and demonstrates that drastic austerity measures serve only to increase unemployment rates.

"This is the way the euro ends — not with a bang but with bunga bunga. Not long ago, European leaders were insisting that Greece could and should stay on the euro while paying its debts in full. Now, with Italy falling off a cliff, it's hard to see how the euro can survive at all.

But what's the meaning of the eurodebacle? As always happens when disaster strikes, there's a rush by ideologues to claim that the disaster vindicates their views. So it's time to start debunking..."

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Posted: November 16, 2011

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