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He has been comparing Spain to Florida for a while.

NYTimes.com: The pain in Spain ... (Paul Krugman Blog, January 19, 2009)

The pain in Spain ...

... isn't hard to explain. Spain was basically Florida, with a housing bubble inflated by both resident and holiday purchases, and now the bubble has burst.

But Spain is in worse shape than Florida, for two reasons -- reasons familiar to anyone who was involved in the great debate about whether the euro was a good idea.

First, Europe doesn't have a central government; Spain, unlike Florida, can't draw on Social Security and Medicare checks from Washington. So the burden of recession falls entirely on the local budget -- hence the country's declining credit rating.

To which I replied (but my comment didn't pass moderation) that Spain is a sovereign country with its own central government, taxes and fiscal policy and, yes, it could draw from its own "Social Security and Medicare". Spain's budget per capita probably exceeds Florida's "local budget" severalfold.

He's just wrong on what it is like to be an EU member state, and has been for two months.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Fri Mar 20th, 2009 at 09:33:51 AM EST
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