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Home Publications Blogs Beat the Press NYT Reinvents History of Euro Crisis

NYT Reinvents History of Euro Crisis

Friday, 15 November 2013 06:09

Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.

And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.

But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:

"The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro."

In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy's deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.

Comments (8)Add Comment
written by Alex Bollinger, November 15, 2013 7:32
I don't know how many times I've heard that deficits led to the euro crisis in the past few years. That zombie just won't die.
NYT ...
written by Squeezed Turnip, November 15, 2013 7:59
... once a newspaper, now an echo chamber. Journalism has died. Reporters mistake "echoing" for "reporting". Or perhaps they are gullible dimwits. Or pete peterson has plants at NYT.
..., Low-rated comment [Show]
written by dax, November 15, 2013 8:28
written by susan jeffries, November 15, 2013 8:33
Reporters at the NYT who write these columns trying to resuscitate this dead horse excuse for Europe's economic woes should stroll down the hall and discuss their article with Dr. Krugman. Perhaps then they could avoid making asses of themselves by writing drivel like this.
Strolling down the hall for review
written by VicJane, November 15, 2013 9:06
susan Jeffries hits on one source of today's inadequate reporting: lack of review by someone other than the writer. But, e.g., Paul isn't down the hall, he's in New Jersey (yes, a reporter could email, but when would he get it relative to the reporter's deadline?) Also, this review function is an editor's job--but what editors are left?
not just the deficit....
written by pete, November 15, 2013 9:36
According to Krugman wages in these countries went up with the bubble above underlying productivity. Hence the need for an inflation as the Keynesian method of bringing real wages back to reality. I recall for Greece he estimated that wages were 25% too high. Likely there was above normal spending by governments on other things like fancy digs for their bureaucrats or raising the pensions, much like the US during the dotcom bubble, with California pensions being raised in 1999...whocouldathunk.
An example of how the banking cartels control countries
written by no more banksters, November 15, 2013 1:07

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.