Paul Krugman

“First, investors stop buying a euro-area nation's bonds, raising the specter that the government will be forced into default because it simply doesn't have the cash to pay interest and principal on its debt. Fear of default then leads to even more capital flight, which increases fears of default and the interest rate, and the vicious circle deepens.”

Paul Krugman · said 2026-10-08 · reported 2026-10-09

Krugman described the vicious circle of investor flight and rising default fears in a Substack blog post about France's debt situation.

“France may have crossed the line from too big to fail to too big to save. In short, it's all too easy to describe a really ugly scenario for a French crisis that would be extremely divisive within Europe,”

Paul Krugman · said 2026-10-08 · reported 2026-10-09

Krugman wrote that France may have crossed from too big to fail to too big to save, warning of an ugly and divisive European crisis scenario.

“France's reliance on the euro means that it's all too easy to see how this loss of confidence could turn into an ugly crisis... We saw this movie in 2009-2012, first in Greece, then in Portugal, Spain and Italy,”

Paul Krugman · said 2026-10-08 · reported 2026-10-09

Krugman wrote in a Substack blog post that France's reliance on the euro makes it vulnerable to a crisis like the 2009-2012 Sovereign Debt Crisis.