Paul Krugman, "Europe’s Many Economic Disasters": Sorry, But Without Children, Europe Is Terminal

By abandoning "austerity" and the euro, can Greece eke out a recovery? Paul Krugman seems to think so. In his latest New York Times op-ed entitled "Europe’s Many Economic Disasters," Krugman writes:

"Why are there so many economic disasters in Europe? Actually, what’s striking at this point is how much the origin stories of European crises differ. Yes, the Greek government borrowed too much. But the Spanish government didn’t — Spain’s story is all about private lending and a housing bubble. And Finland’s story doesn’t involve debt at all. It is, instead, about weak demand for forest products, still a major national export, and the stumbles of Finnish manufacturing, in particular of its erstwhile national champion Nokia.

What all of these economies have in common, however, is that by joining the eurozone they put themselves into an economic straitjacket. Finland had a very severe economic crisis at the end of the 1980s — much worse, at the beginning, than what it’s going through now. But it was able to engineer a fairly quick recovery in large part by sharply devaluing its currency, making its exports more competitive. This time, unfortunately, it had no currency to devalue. And the same goes for Europe’s other trouble spots."

Got it! Greece should tell its lenders to go to hell, abandon the euro, and devalue newly printed drachmas. Hordes of tourists will arrive on its sunny shores, and its shipping industry will boom, all leading to economic recovery . . . or not.

In fact, the way I see it, both Greece and Europe are dying. As observed in a May 30, 2012 Forbes article entitled "What's Really Behind Europe's Decline? It's The Birth Rates, Stupid" by Joel Kotkin:

"Essentially, Spain and other Mediterranean countries bought into northern Europe’s liberal values, and low birthrates, but did so without the economic wherewithal to pay for it. You can afford a Nordic welfare state, albeit increasingly precariously, if your companies and labor force are highly skilled or productive. But Spain, Italy, Greece and Portugal lack that kind of productive industry; much of the growth stemmed from real estate and tourism. Infrastructure development was underwritten by the EU, and the country has become increasingly dependent on foreign investors.

Unlike Sweden or Germany, Spain cannot count now on immigrants to stem their demographic decline and generate new economic energy. Although 450,000 people, largely from Muslim countries, still arrive annually, over 580,000 Spaniards are heading elsewhere — many of them to northern Europe and some to traditional places of immigration such as Latin America. Germany, which needs 200,000 immigrants a year to keep its factories humming, has emerged as a preferred destination."

Unfortunately, this article is just as correct today as it was in 2012.

More specifically regarding Greece, as observed by Nikos Konstandaras in a guest December 2013 New York Times op-ed entitled "Greece's Dismal Demographics":

"Deaths are outnumbering births, people are leaving the country, and the population is aging so fast that in a few decades Greece may be unable to produce enough wealth to take care of its people and may cease to be a viable nation state."

Or stated otherwise, unless this demographic trend in Greece, also prevalent throughout Europe, is reversed, neither austerity nor devaluation are going to rescue anyone.