Krugman says the Eurozone is still barreling down the road to nowhere even as their credit rating is being downgraded by the S&P. Here's why:
We also believe that the agreement [the latest euro rescue plan] is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU’s core and the so-called “periphery”. As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.Angela Merkel today:
German chancellor Angela Merkel has called on eurozone governments speedily to implement tough new fiscal rules after Standard & Poor’s downgraded the credit ratings of France and Austria and seven other second-tier sovereigns.This really has taken on the cast of ritual sacrifice now. It makes no sense, they just want to "purge the rottenness out of the system [so that] high costs of living and high living will come down. People will work harder, live a more moral life -- values will be adjusted, and enterprising people will pick up from less competent people." It's not economics it's religion.