FT on Imbalances in the Euro Area

This FT editorial outlines the challenges facing the euro area.

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For those of us unimpressed with the conventional Paul Krugman dogma of spend spend spend our way out of the recession, this article sums up how hard it is to square the circle that is his bearded mantra of “demand-driven recovery” against the backdrop of looming fiscal collapse in large portions of the European economy.

Not only is the eurozone fringe in danger of fiscal implosion, but an important factor in demand for eurozone exports is consistuted on the Eastern Front, where All is far from Quiet.

In essence, the credit bubble has been exported from the private banking sector into the sovereign bond markets.

If the eurozone did anything right, it was Merkels resistance to calls for even greater stimulus folly last year. Many of those calls came from Krugman himself, but also from the very FT which lauds the eurozones performance.

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