Estonia's President melts down over Paul Krugman article

"Let's sh*t on East Europeans"

By Alex Hern Published 07 June 2012 8:43
Estonian President Toomas Ilves. Photograph: Getty Images
Estonian President Toomas Ilves and his natty bow-tie. Photograph: Getty Images

Paul Krugman really managed to rile up the President of Estonia yesterday.

The Nobel Laureate was writing about how the country, as pretty much the only practitioner of austerity in Europe which isn't back in recession, is the new poster-child for defenders of the practice.

Citing this chart:

He wrote:

So, a terrible — Depression-level — slump, followed by a significant but still incomplete recovery. Better than no recovery at all, obviously — but this is what passes for economic triumph?

Which rather annoyed President Toomas Ilves:

And with that, President Ilves turned his baseball cap backwards, got on his skateboard, and kickflipped into the sunset.

It does seem like someone has a sore spot about their country's growth, and it's not Paul Krugman. Estonia doth protest too much. That said, Ilves is undoubtedly the world leader who is most adept at using twitter for what it was built for: pointless squabbling and passive aggression.

Sadly, his fixed term comes to an end in 2016, which means we won't get to see those diplomacy skills on a world stage when Estonia takes the rotating EU presidency in 2018.

 
 

5 comments

hugh markey's picture

Sat, 2012-09-08 16:51 — hugh markey (not verified)

It's quite simple. People have always chosen with their feet. When the Iron Curtain was in place this fact was not so obvious. Nevertheless, Iriana Trump did make it. And how!
Now that the Baltic States are in the free enterprise zone how many of its populations are moving west?
Are the Baltic States leaking people? On the whole is Eastern Europe voiding excess population at an alarming rate or not? And in which direction are these immigrants travelling?
It's much too late. With the internet the Asian economic giants can take Western jobs whilst competing for essential resources in the Developing World for their remaining citizens.
The Eastern Europeans can only remain anchored in their home countries if the West re-locates its remaining industries in their locality. Not to mention at a price! And besides they're in competition with Asia - not the indolent Westerner.

Schaudenfreud(?)

Estonian's picture

Fri, 2012-06-08 01:09 — Estonian (not verified)

The GDP growth is a direct result of an influx of debt money which fuelled the real estate bubble and inflated the GDP. Look at the debt chart for Estonia:
http://www.indexmundi.com/g/g.aspx?c=en&v=94
I don't think that it is just a coincidence that the fastest growth started in 2000 and the debt started growing massively in that year as well. These two charts mirror each other. And the fact that the GDP peaked at just under $24B in the same year as the debt reached $24B as well clearly shows that most of that GDP growth is actually not real. The problem though is that while GDP fell, the debt stayed virtually the same.
The government promoted private debt by offering tax deductions to those taking out a mortgage amongst other things and once the real estate bubble burst the government cut its social spending (not military though), increased taxes (and keeps increasing) and sold off government property to reduce its own debt while private debt remained the same. That policy is not sustainable so Estonia is actually heading into an even deeper hole than before.
So at the moment the situation in Estonia is that the government debt is low which is the main statistic shown off to the world, but the citizens are stuck with huge debts, unemployment and minimal social benefits.
Just comparing unemployment benefits in Estiona (64euro/month) and Greece (454eur/month) gives a clear picture of the priorities of the government.

ASD's picture

Thu, 2012-06-07 13:36 — ASD (not verified)

Paul Krugman vs. President of Estonia
http://www.tarkinvestor.ee/blog.php?idee=50

Ryan Bourne's picture

Thu, 2012-06-07 11:15 — Ryan Bourne (not verified)

Paul Krugman's blog was insulting to anyone with a degree of economic intelligence. He deliberately used 2007 - the height of the unsustainable boom in Estonia - as the base for examining output. Here's the longer term chart: http://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gd...

Does that look like a depression to you? Since that chart, Estonia has grown strongly whilst slashing public spending, which completely debunks Krugman's doctrine that austerity and growth are incompatible.

The fact that the NS has republished this junk without any background research is telling.

mcquade's picture

Thu, 2012-06-07 10:36 — mcquade

What chart? It's disappeared.

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