You probably heard that the pro-EU party won in the Greek elections yesterday. Matt Yglesias (I have to admit, he’s doing a good job in his new role at Slate) and Krugman have a run-down of what this means and how Greece got there. Krugman on how Greece got there:
On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.[….]
Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece, some but not all of it financing government deficits; the economy boomed; inflation rose; and Greece became increasingly uncompetitive. To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.[….]
So 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.
Yglesias on the meaninglessness of Greece in the European big picture:
Last but by no means least, Greece is basically irrelevant. This is a small, poorish country that has no broader significance in the economic world. If everything else was fine, you could solve—or not solve—the problems of Greece in a dozen different ways. The real issues are Spain and Italy, two much larger countries whose participation in the eurozone speaks to the core purpose of the European project. And while Greek-related worries don’t help Spain or Italy, the problems of Spain and Italy are also quite real and freestanding apart from anything happening in Greece. In Spain, the banking system is a total shambles and since the government can’t print money it can’t bankstop the banking system without bankrupting itself. In Italy, a large outstanding debt stock means that slow nominal gross domestic product growth risks bankrupting the government. In both cases the problems can’t really be solved domestically because the key levers are in the European Central Bank headquarters in Frankfurt, which has turned the whole thing into a complicated international negotiation.
I don’t know much about European politics, and probably I probably shouldn’t speculate here…but I wonder if the southern countries of Europe are the strapping young bucks of Europe — dark and lazy, of course — buying ouzo and tapas with their welfare checks.