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Austerity in the Baltic states during the global financial crisis

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  • Karsten Staehr

Abstract

The Baltic states were arguably the countries most severely affected by the global financial crisis. This article discusses the boom preceding the crisis, the ensuing austerity policies and the economic effects of these policies. All three countries maintained fixed exchange rates, but the degree of fiscal austerity varied across the countries, with Estonia undertaking the strongest fiscal consolidation in 2009. The downturn was so swift and deep that expansionary policies were unlikely to affect short-term outcomes. Growth returned towards the end of 2009, largely driven by exports. The export performance cannot be directly linked to the austerity policies. The main lesson from the Baltics is that increased macroeconomic stability must be attained by avoiding overheating and unsustainable financial exposure. The challenge for the future is to ensure that austerity policies are implemented during economic booms. Copyright ZBW and Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Karsten Staehr, 2013. "Austerity in the Baltic states during the global financial crisis," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 48(5), pages 293-302, September.
  • Handle: RePEc:spr:intere:v:48:y:2013:i:5:p:293-302 DOI: 10.1007/s10272-013-0472-9
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    References listed on IDEAS

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    1. Daniel Piazolo, 2000. "EU integration of transition countries: Overlap of requisites and remaining tasks," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 35(6), pages 264-273, November.
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    Cited by:

    1. Kadri Männasoo & Jaanika Meriküll, 2015. "The impact of firm financing constraints on R&D over the business cycle," Working Papers 348, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. Istvan Benczes & Balazs Szent-Ivanyi, 2015. "The European Economy in 2014: Fragile Recovery and Convergence," Journal of Common Market Studies, Wiley Blackwell, vol. 53, pages 162-180, September.
    3. Piotr Lewandowski & Marek Antosiewicz & Jan Baran & Iga Magda & Monika Potoczna & Maciej Lis & Joanna Tyrowicz & Agnieszka Kaminska & Jan Hagemejer & Karol Pogorzelski, 2013. "Employment in Poland 2012. Labour Market During the Recovery from the Crisis," Books and Reports published by IBS, Instytut Badan Strukturalnych, number zwp2012 edited by Piotr Lewandowski & Iga Magda, january.
    4. Peter Friedrich & Janno Reiljan, 2016. "Estonian Economic Policy during Global Financial Crises," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(4), pages 37-44, January.
    5. Kadri Männasoo & Jaanika Merikull, 2015. "The impact of firm financing constraints on R&D over the business cycle," Bank of Estonia Working Papers wp2015-3, Bank of Estonia, revised 30 Dec 2015.

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