A Case for Public, Not Private, Austerity

As Spain and Greece Burn, Estonia Offers a Lesson, with Ryan Bourne, Heritage Foundation Foundry, September 28, 2012. "Usefully, the Eurozone crisis has provided a natural experiment in how to deal with a severe downturn. The results of that experiment have not favored the unsophisticated Keynesian view that more borrowing is the answer. The highly indebted Southern European states decided to run big fiscal deficits in the aftermath of the crisis, and now face suffocating debt burdens and still-uncompetitive labour markets. On the other side of the spectrum, the Baltic nations (especially Estonia and Latvia) cut government spending and liberalized their economies. While the short term effects were painful, these two countries grew by 8.3 percent and 5.5 percent last year—remarkable when you consider that Greece, Spain, and Italy are in recession."