People have been roasting Paul Krugman because he advocated that Greece give the EZ the finger and then saying he questioned the government’s competence when it failed to do so.
Ben Bernanke, Brookings:
This week the Greek parliament agreed to European demands for tough new austerity measures and structural reforms, defusing (for the moment, at least) the country’s sovereign debt crisis. Now is a good time to ask: Is Europe holding up its end of the bargain? Specifically, is the euro zone’s leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations.
What Bernanke is saying is that unless there’s a major course correction, Europe is likely to fall apart. But he manages to say it soothingly, talking about taking regional growth and trade balance into consideration when demanding a timetable for fiscal balance. As Krugman points out, he’s calling the German approach to Greece as based on a far more Serious level of incompetence than negotiating without a parachute during freefall. Bernanke just knows how to say it more soothingly.
It’s a shame that Bernanke won’t set his hair on fire, which is what the situation calls for.