One of the suggestions regarding Greece’s current woes is that it should cut its public spending, just like Estonia. But, Estonia’s massive cut in public spending, praised by both the EC and the IMF, has resulted in a 15% contraction in Estonia’s GDP in 2009, as compared to only 2% of Greece. Such simplistic fiscal retrenchment may thus worsen matters for Greece.
Greece (Download the full text in PDF format)
(This is a write-up of the author’s presentation at the last week’s Hyman Minsky conference at the Ford Foundation in New York. For a look at the US debate on financial regulation, see Paul Krugman’s talk from the same event)
(The article was originally published in the faculty blog of the Department of Public Administration, Tallinn University of Technology, Estonia)