In fairness, Krugman only has a Nobel Prize, whereas Varadkar wears a tie. Via Irish Central, Krugman writes in The Irish Times – Balanced budgets will not protect you if your banks are free to run wild:
Let’s talk about what really happened in Ireland and Britain.
On the eve of the financial crisis, conservatives had nothing but praise for Ireland, a low-tax, low-spending country by European standards. The Heritage Foundation’s Index of Economic Freedom ranked it above every other western nation. In 2006, George Osborne, now Britain’s chancellor of the exchequer, declared Ireland “a shining example of the art of the possible in long-term economic policy making”. And the truth was that in 2006-07 Ireland was running a budget surplus, and had one of the lowest debt levels in the advanced world.
So what went wrong? The answer is: out-of-control banks; Irish banks ran wild during the good years, creating a huge property bubble. When the bubble burst, revenue collapsed, causing the deficit to surge, while public debt exploded because the Government ended up taking over bank debts. And harsh spending cuts, while they have led to huge job losses, have failed to restore confidence.
Or, hear Krugman’s interview by the USA’s National Public Radio, on the subject of The Economic Failure Of The Euro.
But if he’s promoting that kind of subversive thought, we’re sure Varadkar must think he’s an economic illiterate too.