Unsurprisingly, Paul Krugman has the best big-picture comment on Syriza’s victory in Greece, why it happened, and what the “troika” (the IMF, the European Central Bank, and the European Commission) who have been cracking the whip on the Greeks should now do. The whole mess, he says, is mostly the product of a massive miscalculation by Europeans austerians:
Why were the original projections so wildly overoptimistic? As I said, because supposedly hardheaded officials were in reality engaged in fantasy economics. Both the European Commission and the European Central Bank decided to believe in the confidence fairy — that is, to claim that the direct job-destroying effects of spending cuts would be more than made up for by a surge in private-sector optimism. The I.M.F. was more cautious, but it nonetheless grossly underestimated the damage austerity would do.
And here’s the thing: If the troika had been truly realistic, it would have acknowledged that it was demanding the impossible. Two years after the Greek program began, the I.M.F. looked for historical examples where Greek-type programs, attempts to pay down debt through austerity without major debt relief or inflation, had been successful. It didn’t find any.
So now that Mr. Tsipras has won, and won big, European officials would be well advised to skip the lectures calling on him to act responsibly and to go along with their program. The fact is they have no credibility; the program they imposed on Greece never made sense. It had no chance of working….
[I]n calling for a major change, Mr. Tsipras is being far more realistic than officials who want the beatings to continue until morale improves. The rest of Europe should give him a chance to end his country’s nightmare.
At a time when Europe’s looking far less successful in recovering from the recession than even the half-austerian U.S., it’s really time to suggest a different approach that does not assume pain equals healing. Europe’s economic physicians need to stop applying leeches and look for cures.
