Home > Uncategorized > Factoid of the day: the Baltics, not a textbook example of austerity (guest post)

Factoid of the day: the Baltics, not a textbook example of austerity (guest post)

Graph from Rainer Kattel and Ringa Raudla

Economists at the moment debate the pro’s and con’s of Austerity. The Baltic countries are often used as an example, as they are supposed to have been the first countries to implement such policies. A few days ago I posted a quote which showed that Estonia got quite some transfers from the EU, which facilitated ‘austerity’ policies. However, as one commenter stated, Estonia is only a very, very small country.

Thanks to Rainer Kattel and Ringa Raudla and based upon an as yet unpublished paper we can now publish a graph on EU-transfers to the Baltics (Estonia, about 1 million inhabitants, Latvia, about 2 million inhabitants and Lithuania, about 3 million inhabitants) as well as EU transfers to the PIIGS (over 100 million inhabitants).

Public deficit and EU fiscal transfers (cohesion funds), as % of GDP, in the Baltics, 2008-2010.

Imagine where the debt and deficits of Spain and Italy and maybe even Greece would have been if they had gotten such amounts of money… (Ireland, however, would still be in the trouble). Anyway – when discussing the pro’s and con’s of ‘austerity’ it is highly important to make a distinction between ‘Baltic style’ austerity and ‘PIIGS-style’ austerity.

  1. May 29, 2012 at 7:55 am

    This is a useful post. The ‘Austerity’ Party all across Europe and beyond has argued that ‘internal devalaution’ of the Baltic states (aka wage cuts) can lead to prosperity.

    In Ireland, it has been used to argue that the same wage-cutting model can lead to growth

    http://www.progressive-economy.ie/2012/04/closer-look-at-estonia.html

    What in fact the Baltics show is the power of state (EU) led investment in generating recovery.

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