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Paul Krugman: How the West is keeping the Ukrainian counteroffensive alive

Paul Krugman: How the West is keeping the Ukrainian counteroffensive alive
Paul Krugman: How the West is keeping the Ukrainian counteroffensive alive

The economic difficulties currently facing Ukraine are indeed serious, writes Paul Krugman in the New York Times.

According to official estimates, the real GDP of Ukraine has decreased by 37% compared to a year ago, while at the same time the inflation has soared close to 24% compared to the previous year.

That’s all;“, asks the Nobel laureate American economist through the pages of New York Times.

The decrease in Ukrainian GDP is indeed big but things could not be much different… when an invader occupies a significant part of a country’s territory, blockades its ports and uses missiles to blow up a significant part of its infrastructure.

His height inflation on the other hand it is remarkably low, according to Krugman, given the circumstances. The Nobel laureate American economist also underlines that there are currently several countries that are not at war but have managed to have significantly higher inflation than that of Ukraine. In Turkey, for example, inflation reaches 80%.

Wars are usually accompanied by inflation, with the exception of World War II in the US proving the rule. During the First World War, for example, Britain and the United States had inflation that was not much less than what Ukraine now faces, even though neither of these two countries had their territory invaded at the time.

According to Paul Krugman, Ukraine is currently doing quite well on the economic front considering the circumstances. Why;

On the economic front, the Ukrainians acted coolly and efficiently. They wasted no time in imposing capital controls, thus preventing a massive capital flight from the country, and intervened to stabilize the exchange value of their currency: which is not always a good idea but which in this case helped prevent an inflationary panic.

However, none of this would matter if Ukraine did not also have the support of other countries.

The combined economic weight of all the countries supporting Ukraine makes the Russian economy look small and weak. Diverting even a small fraction of those countries’ resources to Ukraine completely changes the balance of power, as Krugman notes.

This was evident on the battlefield, where Western weapons have changed everything. But it also applies on the economic front, where loans and financial aid from the West are helping Ukraine limit the effects of the war.

The key question now, according to the American economist, is whether this military and economic aid to Ukraine will ever be provided on a sufficient scale to ensure the country’s survival and – as many hope – its victory.

There were four ways Vladimir Putin could have won in Ukraine, according to Krugman.

  1. Quickly capturing Kyiv and overthrowing the government of Ukraine.
  2. Encircling, springboarding Donbas, a large part of the Ukrainian army and then marching towards Kyiv.
  3. Prevailing in a war of attrition that would last, with a barrage of artillery fire gradually wearing down the Ukrainian forces.

And since the Russian side has so far failed to achieve any of the above, Putin is now left with only one path to eventual victory:

  1. The one that goes through the reduction of Western military and economic support to Ukraine. If the flow of arms slows down, Ukraine will find itself at a disadvantage. And if the flow of money turns out to be insufficient, Ukraine’s economy will sink deeper into crisis.

But this is also the reason why Ukraine’s successful counterattack near Kharkiv is so important, as underlined by Paul Krugman. Because by demonstrating their own capabilities on the one hand and Russia’s weakness on the other, the Ukrainians are contradicting and refuting Western officials who still do not believe that Kyiv can win. And by denying these voices, the Ukrainians keep the flow of arms and money alive.

Source: New York Times

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The article is in Greek

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