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Wed Jun 27, 2012, 01:59 PM

Estonia subsidised austerity {krugman/estonia dust up}


The nocturnal tweets of Estonian president Toomas Hendrik Ilves regarding comments by economist Paul Krugman about Estonia, sparked a vivid debate. The Nobel Prize for Economy wrote that Estonia, the incarnation of exemplary austerity, is, in fact not such a fabulous economic success.

This view led to a multitude of criticism. In one of his tweets, Ilves quoted an article by Swedish economist Anders Aslund who noted that in 2008, Estonia had no other alternative but to adopt an austerity policy. "The Baltic States have no independent fiscal or financial policies, therefore they cannot 'stimulate' their economies," Aslund wrote in Estonian daily Postimees.

In a heated Twitter exchange, none of the tweeters took the trouble of taking a closer look at Estonian economic data. To claim that the government has not stimulated the economy is to be, putting it kindly, mistaken.

For the European Union budgetary period from 2007 to 2013, the Baltic States negotiated the highest rate of subsidies in relation to gross domestic product (GDP). As luck would have it, the beginning of the payments, 2008, coincided with the time the world economic crisis grew to worrisome proportions.

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