[Re: Estonia proves that it’s possible to cut spending and continue to grow, yesterday]
While I envy Estonia’s finances and politics, its case merely proves that it’s possible to cut spending and recover from economic crisis if certain conditions are in place – and these are conditions that are almost entirely absent in much bigger and more diversified southern European countries. Firstly, Estonia’s minimum wages were already very low – at only €278 (£221) a month – so it was much easier to regain competitiveness. Secondly, Estonia is very dependent on a small number of fairly stable export markets – including the buoyant economies of Finland and Sweden. Further, it helped that Estonia’s nearby neighbours, including Germany and Poland, were relatively unaffected by economic crisis. These countries could therefore soak up traditionally mobile Baltic workers. The Estonian unemployment rate would have been much higher without this critical pressure valve.
Estonia’s debt to GDP ratio is remarkable – it was just 6 per cent at the end of 2011. This is an example to be heralded, even if Estonia’s austerity programme is more contentious. Eastern European countries, with experience of communist control over their economies, are leading examples of how small states and freedom of movement are the route to prosperity.
France is to tax the rich at 75 per cent. Prepare for capital flight and unemployment. The Eurozone is already shaky.
The last German wealth taxes were abolished in 1997, Finland’s ended in 2006, and Sweden’s in 2007. It increased revenue.
Spain – the only country in the world with simultaneous banking, economic, sovereign debt, political and constitutional crises.
Ed Balls says he’ll cut public spending. He’s attacking from the right. Even Labour seems to be saying public spending is too high.