Paul Krugman, "Europe’s Great Illusion": Krugman's Incessant Delusion

Yes, Europe is a mess. How bad? Workers from Moldova and Romania, who sought employment in Spain, Portugal and Italy, are returning home. The economies of Moldova and Romania are, of course, no better than those of Spain, Portugal and Italy, but at least these workers have family and places where they can stay in their home countries without paying rent, which they can no longer afford elsewhere in Europe.

In his latest New York Times op-ed entitled "Europe’s Great Illusion" (http://www.nytimes.com/2012/07/02/opinion/krugman-europes-great-illusion.html), Paul Krugman continues to bemoan EU austerity measures intended to remedy the continent's economic malaise. Krugman writes:

"It comes as something of a shock, even for those of us who have been following the story all along, to realize that more than two years have passed since European leaders committed themselves to their current economic strategy — a strategy based on the notion that fiscal austerity and 'internal devaluation' (basically, wage cuts) would solve the problems of debtor nations. In all that time the strategy has produced no success stories."

So Europe's woes stem primarily from mistaken fiscal austerity? Yeah, right.

There is no mention by Krugman of the vast numbers of people who migrated from North Africa and Turkey and have taken up residence throughout the EU, but have no intention of returning home. This is a ticking time bomb: For example, Muslims in France account for some 10% of the population, unemployment among young Muslims is estimated to exceed 45%, and Muslims are estimated to account for more than 50% of French inmates. Given the high birth rates of France's Muslim population, these problems are not going to disappear anytime soon, regardless of whether economic austerity policies continue to be implemented.

Also no mention by Krugman that Europeans retire sooner than Americans, and the reason for this phenomenon is no secret. As explained by Migration News (http://migration.ucdavis.edu/mn/more.php?id=3551_0_4_0):

"Europeans continue to retire earlier than Americans. One reason is that European retirement systems offer relatively generous payments not linked to stock market performance. In 2008, a third of Americans aged 65 to 69 were in the labor force, but four percent of French workers in this age group. In the US, Social Security replaces an average 45 percent of pre-retirement income; in Europe the share can reach 90 percent, as in Denmark."

Can Europe afford these exceedingly generous incentives provided to productive persons abandoning the work force? Not a chance.

Bottom line: Europe must compete in the economic arena with the US, Japan, China and Korea, but it is being forced to do so with one hand tied behind its back. In order to compete, Europe will ultimately need to rid itself of policies that are destroying its competitiveness, but such acquired wisdom will be a long time in coming, if ever.