The three small Baltic republics are poster-children for austerity advocates. They all boomed thanks to a flood of cheap money from Scandinavian banks which ignited a real-estate bubble. Once the crisis hit, the advice from the International Monetary Fund was to unpeg their currencies from the euro and devalue. All three refused — choosing instead to regain competitiveness by slashing wages and social benefits.
Latvia’s per capita GDP contracted by 23 percent from 2008 to 2010, almost the same slump as Greece has experienced since 2008. Lithuania fell by 17 percent, while Estonia contracted by 13 percent.
Instead of asking for help, Lithuania borrowed on international markets at a rate of more than 10 percent. Some civil servants saw their pay slashed by one third. Pensioners also saw their benefits cut.
Latvia had an aid program worth €7.5 billion, but only tapped €4.5 billion of that, and repaid the loan early.
Lithuania’s per capita GDP is now 21 percent higher than before the crisis, Estonia is up by 20 percent, while Latvia is 8 percent higher, according to Eurostat.
That experience has made Baltic leaders very critical of Greek demands.