As the euro struggles to survive, “ideologues” are using the failing currency as political ammunition. They say it proves welfare states don’t work, and that the US needs “immediate fiscal austerity.” But they’re jumping to false conclusions, writes Paul Krugman in the New York Times. Sure, European countries offer more social benefits than the US does. But the biggest welfare states aren't the ones most in trouble—"if anything, the correlation runs the other way."
Sweden, for example, is known for the benefits it provides, yet it’s “one of the few countries whose GDP is now higher than it was before the crisis.” As for austerity, interest rates depend less on the amount of government debt and more on the currency in which a government borrows. What’s more, “in the face of the current crisis, austerity has been a failure everywhere it has been tried,” Krugman points out. “No country with significant debts has managed to slash its way back into the good graces of the financial markets.”