Like many of you, no doubt, I followed yesterday’s Greek elections with considerable ambivalence. It was difficult not to sympathize with the anti-austerity forces. But we were all told repeatedly that their victory would mean a run on banks, a Greek departure from the eurozone, and then quite possible global economic chaos and recession. Wh needs that right now?
So Ezra Klein’s summary of the reaction–“The world breaths a sigh of Grelief”–at New Democracy’s apparent win (or more specifically, apparent positioning to create a pro-eurozone coalition with the PASOK and Democratic Left parties) wasn’t surprising.
As usual, Krugman supplied the big picture:
Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency’s troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more.
Which brings us to Sunday’s Greek election, which ended up settling nothing. The governing coalition may have managed to stay in power, although even that’s not clear (the junior partner in the coalition is threatening to defect). But the Greeks can’t solve this crisis anyway.
The only way the euro might — might — be saved is if the Germans and the European Central Bank realize that they’re the ones who need to change their behavior, spending more and, yes, accepting higher inflation. If not — well, Greece will basically go down in history as the victim of other people’s hubris.
Which is why the most significant European election over the weekend might have actually occurred in France, per Reuters:
A resounding Socialist victory in weekend parliamentary elections will allow President Francois Holland to press ahead with reforms to tame France’s deficit and promote economic growth in Europe, a senior minister said on Monday.
The Socialists, who won a comfortable majority in Sunday’s parliamentary elections, will use a special session of parliament next month to axe tax breaks and increase taxes for large corporations, particularly banks and energy companies.
The measures are part of Hollande’s twin track drive to balance France’s budget by 2017 and persuade Europe’s paymaster Germany to back his call for a stimulus package of more than $100 billion to boost growth.
Should be an interesting euroweek.