Krugman CitesTwo Problems With The Eurozone Rescue Plans

Krugman makes his usual arguments against austerity as the weapon of choice in Europe, and he raises two, more general problems, that need to be considered.  The first problem is that many believe that Europe will do what is necessary to maintain the common currency because of the catastrophic consequences of not doing so.  He provides a history lesson in which Europe failed to resolve important issues that led to bad consequences that were also predictable.  Germany, of course, is the key to any plan that will save the European Project.  He is concerned that German politicians may have created a problem that will limit their flexibility.  They have provided the electorate with a false cause of the eurozone problem that makes it less likely to support solutions that will work.  The electorate believes that the countries in difficulty should be punished for the profligacy of their governments.  With the possible exception of Greece, this is not the source of the problems  in the Eurozone.