Reading Paul Krugman's latest post on Greece motivated me to go back and reread an earlier post by Tyler Cowen at Marginal Revolution. And that got me thinking about Bibi Netanyahu's recent speech to Congress and an analytic piece by Steve Chapman on that speech. The bottom line: Krugman's thinking on Greece is a lot like Netanyahu's thinking on Iran.
Parenthetical note: Is there any blogger out there who comes up with better titles than Krugman? If so, I havent seen him or her.
Tyler Cowen has laid out the problem with the Greek government's strategy:
The Greek government also riled up its citizens and now doesn't know how to deliver anything satisfactory to them, to the detriment of political stability. The latest irresponsible plan is to threaten a referendum on a new government, a new economic plan, or in one case even a referendum on euro membership was mentioned. Message discipline is scarcely to be seen.
All of that is simply painting the Greek government into a corner all the more, since a referendum will simply heighten the demands for mutually inconsistent outcomes. Signs of broader eurozone recovery, and the relative success of QE in talking down the value of the euro, have almost completely removed the bargaining power of Syrizas, or so it seems as of early March.
As I've said before, these people ruling Greece are The Not Very Serious People, and they are increasingly acquiring a reputation as such within the rest of the EU and eurozone.
In other words, Greece's government is simply not being realistic.
How does this compare to Netanyahu's recent speech to the U.S. Congress. Here, I don't need to quote his speech. You can find it for yourself. While in some ways, it was a great speech, in the important ways--actually laying out a plausible alternative--it wasn't. President Obama nailed when he said that Bibi said "nothing new."
Benjamin Netanyahu came to the U.S. Capitol Tuesday and offered an idea so simple and brilliant that everyone in the White House must have felt dumb for not thinking of it. His alternative to the imperfect deal the U.S. may strike with Iran? A perfect deal.
And further Chapman:
He [Netanyahu] claims the world can force capitulation with sanctions: "Iran's nuclear program can be rolled back well beyond the current proposal by insisting on a better deal and keeping up the pressure on a very vulnerable regime, especially given the recent collapse in the price of oil."
As if. The regime has weathered far worse conditions than these. It survived the 1980s in spite of a collapse in the price of oil, U.S. economic sanctions, and a devastating eight-year war with Iraq.