Economy

Paul Krugman: Showdown in Europe Raises the Ugly Specter of Fascism

Greece and especially Germany are playing a perilous game of chicken.

Photo Credit: via YouTube

Europe is playing a dangerous game of chicken, Paul Krugman writes in his column Friday. When the European Central Bank announced that it would no longer accept Greek government debt as collateral for loans on Wednesday, the move signaled that "the moment of truth is clearly approaching." Here's how Krugman sums up the current situation:

Germany to Greece: Nice banking system you got there. Be a shame if something were to happen to it.

Greece to Germany: Oh, yeah? Well, we’d hate to see your nice, shiny European Union get all banged up.

These fighting words are putting the whole European project at risk, Krugman warns. The standoff is also creating an opening for "sinister political forces that have been gaining influence as Europe’s Second Great Depression goes on and on," he writes. "After a tense meeting with his German counterpart, the new Greek finance minister didn’t hesitate to play the 1930s card. 'Nazism,' he declared, 'is raising its ugly head in Greece' — a reference to Golden Dawn, the not-so-neo-Nazi party that is now the third largest in the Greek legislature."

How on earth, and why on earth would Germany allow itself to approach this dangerous brink? The crisis arises from political pandering, in Krugman's view—German chancellor Angela Merkel's and company's political pandering, that is. Despite the clear evidence that there is no way that Greece can repay its debt, Merkel keeps up the tough, moralizing talk and even plays on stereotypes of lazy southern Europeans. Apart from the potential appeal to some of her more right-wing constituents, what could be behind this strategy? Krugman speculates:

Maybe the Germans imagine that they can replay the events of 2010, when the central bank coerced Ireland into accepting an austerity program by threatening to cut off its banking system. But that’s unlikely to work against a government that has seen the damage wrought by austerity, and was elected on a promise to reverse that damage.

The one bright spot, according to Krugman is that there are signs that the European Central Bank might not go a long with Germany's tough and futile talk. And if Germany won't stop, the Central Bank may be the only thing safeguarding "Europe’s economy and democratic institutions."

Stay tuned.

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