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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;ZBW - Leibniz Information Centre for 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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    Cited by:

    1. Petar Sorić, 2022. "Ability to consume versus willingness to consume: the role of nonlinearities," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 663-689, August.
    2. 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.
    3. Čekanavičius Linas, 2018. "On the Choice of Fiscal Adjustment to Financial Crises: Expansionary vs. Contractionary Policies," Ekonomika (Economics), Sciendo, vol. 97(2), pages 7-17, December.
    4. D�ra Győrffy, 2015. "Austerity and growth in Central and Eastern Europe: understanding the link through contrasting crisis management in Hungary and Latvia," Post-Communist Economies, Taylor & Francis Journals, vol. 27(2), pages 129-152, June.
    5. Männasoo, Kadri & Meriküll, Jaanika, 2020. "Credit constraints and R&D over the boom and bust: Firm-level evidence from Central and Eastern Europe," Economic Systems, Elsevier, vol. 44(2).
    6. 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(04), pages 37-44, January.
    7. 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.
    8. Adomas Klimantas & Aras Zirgulis, 2020. "A new estimate of Lithuanian GDP for 1937: How does interwar Lithuania compare?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 227-281, May.
    9. Sonya Georgieva, 2021. "Fiscal Multipliers in Bulgaria and Central and Eastern Europe Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 131-167.
    10. 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).
    11. Povilas Lastauskas & Julius Stakenas, 2018. "Openness And Structural Labor Market Reforms: Ex Ante Counterfactuals," Contemporary Economic Policy, Western Economic Association International, vol. 36(4), pages 723-757, October.
    12. Povilas Lastauskas & Julius Stakenas, 2016. "Openness and Structural Labour Market Reforms: Counterfactuals for Lithuania," Bank of Lithuania Discussion Paper Series 1, Bank of Lithuania.
    13. 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.
    14. Petar Sorić & Ivana Lolić & Marija Logarušić, 2022. "Economic Sentiment and Aggregate Activity: A Tale of Two European Cycles," Journal of Common Market Studies, Wiley Blackwell, vol. 60(2), pages 445-462, March.
    15. Dimitris Ballas & Ilias Thanis, 2022. "Exploring the Geography of Subjective Happiness in Europe During the Years of the Economic Crisis: A Multilevel Modelling Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 164(1), pages 105-137, November.
    16. S. Pásztor & N. Szijartó, 0. "Internal devaluation and its macroeconomic consequences in the EU periphery - a comparison of the Iberian and Baltic countries," International Trade and Trade Policy, ФГБОУ ВО "Ð Ð¾Ñ Ñ Ð¸Ð¹Ñ ÐºÐ¸Ð¹ Ñ ÐºÐ¾Ð½Ð¾Ð¼Ð¸Ñ‡ÐµÑ ÐºÐ¸Ð¹ ÑƒÐ½Ð¸Ð²ÐµÑ€Ñ Ð¸Ñ‚ÐµÑ‚ им. Г.Ð’. Плеханова", issue 4.
    17. Karsten Staehr, 2016. "Exchange Rate Policies in the Baltic States: From Extreme Inflation to Euro Membership," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(04), pages 09-18, January.
    18. K. B. Usha, 2014. "Social Consequences of Neoliberal Economic Crisis and Austerity Policy in the Baltic States," International Studies, , vol. 51(1-4), pages 72-100, January.
    19. Ketevani Kapanadze, 2021. "Checkmate! Losing with Borders, Winning with Centers. The Case of European Integration," CERGE-EI Working Papers wp716, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    20. Abuselidze, George & Mamuladze, Linda, 2020. "The Peculiarities of the Budgetary Policy of Georgia and the Directions of Improvement in Association with EU," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 73.

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