In his Monday column, economist Paul Krugman chided the "monstrous self-indulgence" of European leaders who were told by economists that establishing a single currency would be a horrible idea, then went ahead and established it anyway.
The euro was pushed by "forward-looking, European-minded" politicians who "didn't want nerdy economists telling them that their glamorous vision was a bad idea," so much so that anyone even trying to object to the currency project "was effectively shut out of the discussion."
The problem with shutting "nerdy economists" out of a currency discussion, Krugman argued, is that people end up mistaking happenstance for proof. Initially, "a huge financial bubble masked [the euro's] underlying problems," and the imposition of "draconian austerity problems on debtor nations" only exacerbated them.
What should Europe do now? There are no good answers — but the reason there are no good answers is because the euro has turned into a Roach Motel, a trap that’s hard to escape. If Greece still had its own currency, the case for devaluing that currency, improving Greek competitiveness and ending deflation, would be overwhelming.
The fact that Greece no longer has a currency, that it would have to create one from scratch, vastly raises the stakes. My guess is that euro exit will still prove necessary. And in any case it will be essential to write down much of Greece’s debt.
But we’re not having a clear discussion of these options, because European discourse is still dominated by ideas the continent’s elite would like to be true, but aren’t. And Europe is paying a terrible price for this monstrous self-indulgence.