Krugman on the debt negotiations between Greece and the EU in April 2015- how the Syriza government Greece wins flexibility for 2015-2016

02/24/2015

Krugman cuts through the fog of media commentary about the Greece negotiations with the EU in April 2015. He says in actual fact the situation is better for Greece than under the previous government, with Greece winning new flexibility for how much it must make in cuts. Under the Samaras government the primary surplus, which is the difference between revenue and expenditures not counting interest on debt, would have to triple from what it is likely to be now. Syriza Tsipras government has won flexibility by keeping language about increases in the future surplus obscure. Krugman points out that it is the primary surplus that matters most, because it is the money Greece has to transfer to creditors. On the revenue side Krugman says collecting taxes needs to be more efficient, and he cannot see how this should be any other way. In the eurozone as a whole the move is away from austerity and towards constructive reforms that promote economic growth. Italy and France also won new flexibility in talks with the EU in addressing the deficit for 2015-2016. As a result the story is positive for the eurozone, yet commentary in the media makes it look like there is the prospect of further decline in the region. As a sign of the recovery auto sales in the eurozone increased by about 9% year over year for the 1st quarter of 2015, with sales increases across the eurozone including Greece and Ireland, and large increases in Spain, Portugal.

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