Krugman slams Greece, Germany slams Krugman

Renowned economist, and a fervent critic of austerity, Paul Krugman has slammed the Greek government for accepting harsh tax and reform measures. On the very same weekend, German Finance Minister, Wolfgang Schaeuble, openly questioned the Nobel Prize-winner's knowledge of Europe's monetary union.

Krugman had been calling for Greece's government to reject the proposals that creditors have demanded in exchange for unlocking much-needed cash. He had dubbed the demands as "madness" and a "complete destruction of national sovereignty."

With the reforms having been given the green light, Krugman told CNN Sunday that he may have "overestimated the competence of the Greek government."

"(The Greek government) thought they could simply demand better terms without having any backup plan," he told the news channel in an interview. "So, certainly this is a shock."

The radical-left Syriza Party was elected this year with a mandate to reject tough austerity measures from creditors but last week agreed to a deal despite Prime Minister Alexis Tsipras stating that he did not believe in it. Tsipras has since tried to weather a storm within his own party and experts suggest that another election could come later this year.

Krugman - a noted Keynesian - has been a very vocal critic of the austerity that has been placed on Greece from euro zone lawmakers, which include those in Berlin. Schaeuble used an opportunity to respond to Krugman when asked about the economist in an interview with German newspaper Der Spiegel.

"Krugman is a prominent economist who won a Nobel Prize for his trade theory," he said in an interview on Saturday.

"But he has no idea about the architecture and foundation of the European currency union. In contrast to the United States, there is no central government in Europe and all 19 members of the euro zone must come to an agreement. It appears Mr. Krugman is unaware of that."

The U.S. economist has been using this regular New York Times column on Monday morning to resurrect his idea that pro-austerity European lawmakers are behaving self-indulgently.

Meanwhile, others in the finance industry - like Silicon Valley venture capitalist Marc Andreessen – have been using the social media site Twitter to poke fun at Krugman after his admission that he had been wrongfooted by the Greece's left-wing leadership.

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NICHOLAS KAMM | AFP | Getty Images

Krugman said Monday that the idea of the single currency sounded too good to the European politicians who were tasked with creating the euro. He also predicted that a euro exit for Greece would still prove necessary.

"It sounded forward-looking, European-minded, exactly the kind of thing that appeals to the kind of people who give speeches at Davos. Such people didn't want nerdy economists telling them that their glamorous vision was a bad idea," he said in the NYT on Monday.