Krugman blogs:

The usually well-informed Ezra Klein says something odd this morning:

In 2007 and 2008 we had a major financial crisis. That led to a wrenching recession. But what killed the recovery was the European debt crisis. It was proof that there wasn’t just one risk that the system hadn’t properly accounted for, but many risks. And in a fragile global economy, the impact of any negative event was going to be magnified.

I don’t know where Ezra got that, but it’s just not right. It’s not as if we had a solid recovery, then Greece came along. We never had the basics for self-sustaining recovery in place: aside from the stimulus and inventory bounce, demand remained weak. And financial jitters from the eurozone crisis had nothing to do with the US slowdown; growth is flagging because both the stimulus and inventory effects are fading.

I think it's an open question. Bernanke said the same thing in his June testimony. My guess is that it's all of the above: the stimulus and inventory effects are fading and the European sovereign debt crisis happened. I'm not sure but I would guess that it pushed up the dollar and made businesses and consumers more cautious. No doubt it helped the austerians rhetorically. They could now point to Greece as example of what could happen to a country that wracks up too much debt.

Update: Ezra Klein repsonds

But a lot of the economists, business types and policymakers I've talked to have pinned the European debt crisis as a moment when whatever confidence various players had in the recovery collapsed. It was a whole new world moment: We hadn't just gone through one horrible, unlikely event and now we were recovering, and people should plan for a slow return to normal. The debt crisis was emphasized that there are a lot of risks out there and the world economy is vulnerable to them. The danger for businesses looking to invest wasn't just that demand could come back slowly but that everything could totally fall apart.

My guess is Krugman would dismiss that as rationalization. If government had responded to the crisis correctly and the economy was gaining more jobs and people were buying more things, businesses would be investing to meet the demand. And I agree with that. But in the absence of the correct government response, there's certainly a range of possible ways the private sector could've reacted, and I think it's plausible that their extreme caution is partly a response to seeing the world economy as vulnerable to all sorts of unpredictable shocks, which is leading them to wait for much more solid evidence of recovery than might otherwise be the case.

On the other hand, Krugman has a Nobel, and I, well, don't.

Along with the deleveraging in the economy and not enough aggregate demand, I would guess another problem is "over"-demand for safe assets because people are nervous, in part because of the lack of aggregate demand. The European sovereign debt crisis would have added to this nervousness, unlike, say, Obama's tax and regulatory policies.  But as Klein says, I don't have a Noble either.