A couple of years ago (February 2010), I thought I was being really heterodox, when I argued that Greece should be given 7-8 year to consolidate its public finances, because any sharp consolidation plan would push it into recession. The interview was in French, but more or less I said that
Standard and Poor’s decision to downgrade a large number of EU countries, on Friday, was widely expected; and, as I write, markets barely reacted. This is not surprising, as the downgrade had already been embedded in market behaviours.
There are of course notable political consequences, for example in what concerns the French presidential race. But from an economist perspective, this is really not a turning point.
There is nevertheless a remarkable news, that went almost unnoticed. Read more…