Estonian Rhapsody by Paul Krugman

07.06.2012, 10:28

Nobel Prize-winning economist Paul Krugman devoted 65 words to debunking the Estonian miracle on his blog this week..

In a post entitled "Estonian Rhapsody" on his New York Times blog, the noted Keynesian and Eurozone skeptic trotted out one of the exhibits that officials talk less about in Estonia - the fact that real GDP is still 10 percent off the high water mark of 2007.


Since Estonia has suddenly become the poster child for austerity defenders — they’re on the euro and they’re booming! — I thought it might be useful to have a picture of what we’re talking about. Here’s real GDP, from Eurostat:

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?