'An Unsustainable Position'

Paul Krugman:

An Unsustainable Position: Everyone is talking about the IMF’s new update to its debt sustainability analysis, which says that Greece’s attempt to surrender is doomed to failure without massive debt relief. That’s surely the right conclusion.

However, it’s hard to accept the document’s claim that this is a new development...

The point, surely, is that the plan for Greece was never feasible. No matter how willing a nation is to suffer, no matter how willing to run primary surpluses on a scale that is very rare in history, trying to pay off high debt through austerity without any kind of monetary offset is basically a recipe for debt deflation and failure. This is, in fact, what the IMF’s own research has said. ...

So it’s good to see the IMF being realistic here, but the institution remains unwilling to face up fully to past errors — which matters, because these past errors are prologue to the doom that faces any attempt to stay the course.