Paul Krugman is quite right: the most recent Eurozone GDP numbers are really disappointing. But hardly surprising, given current policies, unless you’re the sort of person who thinks that peripheral yields are the only thing that matters. (Not a great metric of success you would think, if they have been falling in Greece, but there you go.)
I recently read someone (can’t remember where, perhaps you can) saying — based on the yields — that the eurozone crisis was now over economically speaking, and that the only thing that might derail things now was the politics. Which made me think two things:
1. It is surely unacceptable intellectually to regard the predictable political consequences of lousy economic policy as being somehow ‘exogenous’ and none of our business as economists.
2 If the politics of the eurozone crisis eventually turns sour, won’t this show up in various financial spreads , and wasn’t this the whole point of the ‘second generation’ crisis models we all starting teaching our students in the early 1990s?
Even if it’s cancer that kills you, death coincides with cardiac arrest.