One week after Greece's leftist government reached a new debt deal with its creditors, Paul Krugman argues in his New York Times column today that left-wing criticism of the deal is misguided, obscuring larger victories secured by Greek negotiators.
What was at stake in the negotiations, the Nobel Prize-winning economist writes, was whether Greece would have to impose further austerity measures on its already beleaguered populace. The Syriza government avoided such a calamity:
The previous Greek government had agreed to a program under which the primary surplus would triple over the next few years, at immense cost to the nation’s economy and people.
Why would any government agree to such a thing? Fear. Essentially, successive leaders in Greece and other debtor nations haven’t dared to challenge extreme creditor demands, for fear that they would be punished — that the creditors would cut off their cash flow or, worse yet, implode their banking system if they balked at ever-harsher budget cuts.
So did the current Greek government back down and agree to aim for those economy-busting surpluses? No, it didn’t. In fact, Greece won new flexibility for this year, and the language about future surpluses was obscure. It could mean anything or nothing.
Krugman concedes that the debt deal contains other provisions with which leftists quarrel. Greek negotiators agreed to proceed with privatization deals already underway and to preserve some "structural reform" of the labor market implemented by the leftist government's predecessors. But Greece also redoubled its commitment to cracking down on tax evasion, particularly by the wealthy; you'd be hard-pressed to frame that as a defeat for the left.
With a mounting deflationary threat in the European Union, Krugman argues that Greece has "done the rest of Europe a favor," citing the European Commission's recent decision not to fine Italy and France for exceeding their above-target deficits. The commission's move suggests that austerity mania may be abating on the continent.
All in all, Krugman concludes, the pushback against austerity is meeting with notable successes -- "even if nobody believes it."