Rapid responses

The case of Estonia

[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.

Alex Coleman

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.

Patrick Golan

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