Markets in Europe have extended their rally on Friday, rising under 1%, following Thursday's jubilant reaction to Europe's latest Greek rescue plan.
But Nobel Prize winning economist and New York Times columnist Paul Krugman was not uncorking champagne along with market traders. Comments on his Times blog indicate the lifeline thrown to Greece will end up choking the life out of the entire eurozone. Krugman, known for his Keynesian approach to economics, argues that the Greek rescue plan, by imposing austerity on all euro area member states, will depress demand throughout the eurozone and thereby forestall an economic recovery in Europe.
In several posts written since Thursday's Brussels summit meeting, Krugman particularly parsed the ninth article of the European leaders' 14-point plan, which reads:
"All euro area Member States will adhere strictly to the agreed fiscal targets, improve competitiveness and address macro-economic imbalances. Public deficits in all countries except those under a programme will be brought below 3% by 2013 at the latest."
Krugman's conclusion: "The Serious People are determined to destroy all the advanced economies in the name of prudence."
