Paul Krugman is calling the European summit agreement on Greece “the sacking of Athens.” He said, gloomily, “So we have learned that the euro is a Roach Motel — once you go in, you can never get out. And once inside you are at the mercy of those who can pull your financing and crash your banking system unless you toe the line.”

See also Krugman’s blog posts “Faithocrats,” “The Pause of 2014,” “An Unsustainable Position,” and “History Lessons for Euro Debtors,” which together make about as good a primer on the Greek situation that there is. See also Ivan Krastev, “A Greek Farce.”

The immediate impact of the Greek agreement is calmer markets, defeated Greeks and skeptical Germans. So should Europe celebrate? Do European leaders expect Greece to be transformed by the accord as Central Europe was transformed in the 1990s? Is it possible that the whole referendum episode — a resounding public “no” followed by Mr. Tsipras’s climb-down with the creditors — could serve not to humiliate Greek voters but instead to re-educate them?

While many in Brussels are hoping that the Greeks have learned, it is more than likely that the new reform package agreed to on Monday will result in further radicalization of certain segments of the European left and the spread of apathy in Greece.

Mr. Tsipras’s leftist populism failed to win Greece a better deal. Instead, the real political winner is most likely to be not the moderate center but the anti-European right. And while European leaders can congratulate themselves on keeping the Union going, the price that Europe will pay for saving Greece economically and losing it politically is the transformation of the Union from a project sustained by hopes and aspirations into one surviving on shared fears and confusion.

Krugman says in “Faithocrats,”

But let me note, as I have before, that what Europe calls technocrats aren’t people who know how the world works; they’re people who subscribe to the approved fantasies, and never change their minds no matter how badly wrong things go. Despite the overwhelming evidence that austerity has exactly the dire effects basic textbook macro says it will, they cling to belief in the confidence fairy. Despite a striking lack of evidence that “structural reform” delivers much of a growth boost, especially in an economy suffering from a huge output gap, they continue to present structural reform — mainly in the form of disempowering workers — as a sovereign remedy for all ills. Despite a clear record of past failure, they continue to push for asset sales as a supposed answer to debt overhang.

In short, what Europe usually means by a “technocrat” is a Very Serious Person, someone distinguished by his faith in received orthodoxy no matter the evidence.

Structural reform in the form of disempowering workers sounds pretty much like what the Republicans want to impose on us, here.  Faith-ocratism will be our doom.

While most of the world is cluck-clucking about how Greece needs to play by the rules and do what it’s told, a whole lot of economists are saying something else entirely.

Thomas Piketty et al.:

The never-ending austerity that Europe is force-feeding the Greek people is simply not working. Now Greece has loudly said no more.

As most of the world knew it would, the financial demands made by Europe have crushed the Greek economy, led to mass unemployment, a collapse of the banking system, made the external debt crisis far worse, with the debt problem escalating to an unpayable 175 percent of GDP. The economy now lies broken with tax receipts nose-diving, output and employment depressed, and businesses starved of capital.

The humanitarian impact has been colossal—40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent. Corruption, tax evasion and bad accounting by previous Greek governments helped create the debt problem. The Greeks have complied with much of German Chancellor Angela Merkel’s call for austerity—cut salaries, cut government spending, slashed pensions, privatized and deregulated, and raised taxes. But in recent years the series of so-called adjustment programs inflicted on the likes of Greece has served only to make a Great Depression the likes of which have been unseen in Europe since 1929-1933. The medicine prescribed by the German Finance Ministry and Brussels has bled the patient, not cured the disease.

Paul Krugman:

It’s now clear, or should be clear, that the Greek program was doomed to failure without major debt relief; no matter how hard the Greeks tried, austerity would shrink GDP faster than it reduced debt relative to the baseline, so that the debt situation was bound to worsen even as the attempt to balance the budget imposed vast suffering.

And there was no good, or even non-terrible, answer given Greece’s membership in the euro.

But there’s a broader lesson from Greece that is relevant to all of us — and it’s not the usual one about mending our free-spending ways lest we become Greece, Greece I tell you. What we learn, instead, is that fiscal austerity plus hard money is a deeply toxic mix. The fiscal austerity depresses the economy, and pushes it toward deflation; if it’s accompanied by hard money (in Greece’s case the euro, but a fixed exchange rate, a gold standard, or any kind of obsessive fear of inflation would do the trick), the result is not just a depression and deflation, but quite likely a failure even to reduce the debt ratio.

Joseph Stiglitz:

I don’t believe Europe’s leaders were seeking to punish Greece. They were just using bad models — evidenced by the enormous gap between what they thought would happen and what did happen. Europe and the International Monetary Fund predicted a fairly quick turnaround. The reality was deepening recession.

And it wasn’t because Greece didn’t do what it was supposed to; it was because it did. On the all-important macroeconomic front, Greece had the biggest and fastest fiscal consolidation among the advanced European economies in the aftermath of the global financial crisis, ruthlessly cutting back expenditures and raising new revenues. …

…The ball is now in the court of European leaders. The question is, will they stick with a policy that has proved a disaster? Or will they combine a desire to preserve the euro with good economic policies and a respect of democracy? Can they reform the reform package sufficiently?

This is the moment to stand up against unthinking austerity. Four years ago, as the first signs of the failure of this policy emerged, Europe’s leaders recognized that what was needed was a growth strategy. They promised Greece that. They didn’t deliver. There was just more of the same.

(Weirdly, but typically, the lesson Stephen Moore of Fox News draws from the Greece example is that socialism has failed. WTF?)

Exactly what’s to be done to turn the Greek economy around is hard to say, but Piketty et al. lay out a broad outline:

Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.

In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.

To Chancellor Merkel our message is clear; we urge you to take this vital action of leadership for Greece and Germany, and also for the world. History will remember you for your actions this week. We expect and count on you to provide the bold and generous steps towards Greece that will serve Europe for generations to come.

We’ll see if they can put aside the Austerity Mystique and do what really needs to be done.

I’m always heartened when I hear about Celts acting up. So I read “The Irish Rebellion Over Water” by Fintan O’Toole with some interest. Background: the Irish economy crashed because a handful of greedy bankers had been playing Ireland like a slot machine, and they lost. And the Irish have been paying for the bankers’ sins with a gawdawful austerity program that conservatives have praised as the model all nations must follow.

According to conservatives, the Irish Recovery is the wonder of Europe. According to Fintan O’Toole — and Paul Krugman — it’s a fraud. O’Toole writes,

There is a deep sense of injustice at being turned into one of the most indebted nations on earth in order to rescue international bondholders who gambled on rogue Irish banks. There is the way the pain has been inflicted most deeply on the poorest people — the last four government budgets have been regressive, hitting those on the lowest incomes hardest. There is the bitterness of yet again having to export the country’s greatest asset: its talented, highly educated young people.

Above all, there’s the gap between the Irish story and the Irish experience. The story is upbeat — austerity works. The experience is rather different. The impressive G.D.P. figures are at least partly unreal, boosted by the accounting practices of Irish-based multinationals.

Unemployment remains very high, and the figures would be much worse if people were not emigrating. Household debt in Ireland is still the second highest in Europe relative to disposable incomes, which have not improved.

 O’Toole wrote earlier this year:

But Ireland has two economies: a global one dominated by American high-tech companies, and a domestic one in which most Irish workers have to make their living. The first is indeed booming. Not least because of those low corporate taxes, large global corporations find Dublin convivial for reasons other than its pubs and night life. …

… But home is where the heartache is: in the domestic economy outside the gated community of high-tech multinationals. Outside Dublin, property prices are still falling. Wages for most workers have dropped sharply. Unemployment remains very high at 12.8 percent — and that figure would be higher if not for emigration. There’s always been a simple way to measure how well Ireland is doing: Go to the ports and airports after the Christmas vacation and count the young people waving goodbye to their parents as they head off to the United States, Canada, Australia or Britain, where they have gone to find work and opportunity.

In wingnut lore, Ireland is the Official Proof That Keynes Was Wrong.  Spending cuts, not government intervention and investment, would get the economy growing again, and they’ve got numbers to prove it. They’ve always got numbers to prove whatever they want to believe; righties are brilliant in that regard. But these numbers are statistical illusions. Yes, Ireland has seen an increase in exports, but Krugman explains that “most — most!– of the export rise has come from pharma, which is very intensive in foreign-owned capital, and does very little for Irish incomes and employment.” And, as O’Toole says, the drop in unemployment is mostly because of emigration — educated young people especially are leaving Ireland in droves.

The Irish have thus far been fairly accepting of their government’s policies. But now they are rebelling over water. O’Toole:

In a recent Irish Times poll, 33 percent of people said they would refuse to pay the charges for domestic water when they become due in the spring (and less than half of those polled said they intended to pay). This is in spite of the government’s having already made huge concessions in the face of an earlier wave of protests by reducing the average effective charge to just 160 euros (about $200) a year per household, making Irish domestic water the cheapest in Europe. Compared with many of the other tax increases endured over six years, this seems too small a measure to have such large consequences.

But, O’Toole says, for the Irish this was a deprivation too far. Water? In western Ireland it typically rains 225 days of the year. Water falls from the sky in Ireland, copiously. And having lived with center-right governments for many years, polls show the electorate is turning Left.  Éireann go Brách.