Must-Read: Paul Krugman: Poland vs. Greece

Must-Read: There are a lot of instructive comparisons that can be made around the European periphery–Finland, Latvia, Greece, Spain, Portugal, Ireland, Iceland. They pretty much all lead to the conclusion that given the Austere way the euro has been implemented, it has been a huge mistake for everybody except Germany and Holland–for whom the lower currency value and thus greater export competitiveness produced by the eurozone has been an enormous benefit–a benefit that should make them very eager to pay the fiscal union transfers needed in the eurozone’s current situation.

Paul Krugman**: Poland Versus Greece: “Yannis Ioannides and Christopher Pissarides… talk about the ways lack of structural reform…

…hurts Greek productivity and competitiveness…. It’s very, very wrong to point to factors limiting Greek productivity and claim that these factors are the ‘cause’ of the Greek crisis. Low productivity exacts a price from any economy; it does not normally, or need not, create financial crisis and a huge deflationary depression. Consider… Greece and Poland…. Poland has not had a Greek-style crisis, or indeed any crisis at all. Instead, it has powered through the turmoil…. By adopting the euro Greece first brought on massive capital inflows, then found itself in a trap, unable to achieve the needed real devaluation without incredibly costly deflation. Every time someone asserts that the Greek problem is really on the supply side, you should ask… why this should lead to collapse. Greece… should have real wages only about 60 percent as high as Germany’s. It should not have 25 percent unemployment.