German economists strike back at Paul Krugman for #ThisIsACoup

Shortly after the Greek bailout agreement was announce, Nobel Prize winner economist Paul Krugman attacked Germany on his New York Times blog: 

The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for. {...] Who will ever trust Germany’s good intentions after this?

Krugman's over-the-top criticism of Germany didn't sit well with some observers in Germany. Nikolaus Piper, writing in the left-liberal Süddeutsche Zeitung, accused Krugman of launching a "Hate Campaign against Germany" (Hasskampagne gegen Deutschland).  Basically, Krugman is a "Hyper-Keynesian" extremist:

Im Grunde vertritt Krugman einen Hyper-Keynesianismus: Was immer auch passieren mag, neue Schulden, niedrigere Zinsen und höhere Staatsausgaben sind immer richtig. Sparpolitik, oder "Austerität", ist immer falsch. Wer dies anders sieht, bekommt den Zorn Krugmans zu spüren. Über die Gläubiger Griechenlands schrieb er, sie wollten aus "reiner Rachsucht" die nationale Souveränität des Landes komplett zerstören.

(Fundamentally Krugman represents Hyper-Keynsianism: no matter what happens, more debt, lower interest rates and more government spending are the correct response. Spending cuts - or "austerity"- is always the wrong response.  Whoever thinks otherwise incurs Krugman's wrath. Concerning Greece's creditors Krugman wrote that they wanted to completely destroy the country's national sovereignty out of a "pure desire for revenge".)

Writing in the conservative Frankfurter Allgemeine, Gerald Braunberger, sees Krugman as an "Old-Keynesian" whose ideas have been rejected by a younger generation of Keynesian economists:

Krugman, der nahezu alleine steht, fordert unablässig expansive Finanzpolitik; Sorgen vor einer zu hohen Neuverschuldung kennt er nicht. [...]Zu harten Kritikern Krugmans gehören unter anderen sogenannte Neo-Keynesianer. Auch sie sehen in einer Konjunkturkrise Handlungsbedarf, aber nicht durch expansive Finanzpolitik, sondern durch expansive Geldpolitik.

(Krugman, who stands pretty much alone, demands a continuous expansive fiscal policy; he refuses to recognize any concerns with excessive borrowing.  Some of Krugman's harshest critics are so-called Neo-Keynesians. They also advocate government intervention in an economic crisis, but instead of an expansive fiscal policy they look for an expansive monetary policy.)

But there are historical reasons behind the dispute between Paul Krugman and his German colleagues. Krzysztof Bledowski, senior economist and former IMF director:

"Bledowski argues that during the Great Depression and after World War II, Keynesian demand-side economics drove the policy debate in the United States. This policy also underlay the economic recovery of Europe through the Marshall Plan. The United States, the UK, and most other continental economies embraced activist monetary and fiscal policies to manage cyclical variations in the postwar era. In fact, this new orthodoxy spread to the rest of the world as its success became evident.

But not Germany. According to Bledowski, Germany remained an exception as it struggled to accept Keynesian concepts of countercyclical policies. Instead, the country’s economists and policymakers opted for an ordoliberal approach. According to this doctrine, the social market economy relies on heavy redistribution of income through the state but avoids activist demand management."

Comments

[Zyme]

Viel Feind, viel Ehr! :-)

Honestly, when so many foreign observers cry out in anguish, something unthinkable must have happened. Could it be that our leaders have actually pursued German interests for once?
We will find out if it serves us well in the long run.

Personally I guess Schäuble & Co want Greece to leave the Euro (and thus teach the other southern countries a lesson). Once the Greek have hanged Tsipras for betrayal, this is what is going to happen in my point of view.