Krugman: Besides Greece and Portugal European economies now in trouble were following sound fiscal
policies before the crisis.
European Fiscal History
http://krugman.blogs.nytimes.com/2012/01/05/european-fiscal-history/
Nice paper in Vox decomposing the rise in debt-GDP ratios for troubled European economies. I’d make special note of this observation:
Projections suggest that some European countries had an unsound fiscal stance (in terms of debt-to-GDP ratio evolution) well before the 2008–09 financial crisis (Greece, Portugal, the UK); on the contrary, others had a sound fiscal stance (Spain, Ireland, Italy).
To understand what this means, you need to know that the combined GDP of Greece and Portugal is a bit over $500 billion (the UK isn’t in crisis), while the combined GDP of Spain, Ireland, and Italy is more than $3.5 trillion. So the economies now in trouble were, overwhelmingly as measured by economic importance, following sound fiscal policies before the crisis.
Yet the whole European response has been based on the assumption that fiscal profligacy was the villain.