Rainer Kattel, "Should Greece Follow Estonia's Example?"  

Rainer Kattel, "Should Greece Follow Estonia's Example?":

...Simply put, the eurozone assumed and still tacitly assumes either growing German wages or growing productivity in the rest of Europe. Neither has been the case.

The Baltic economies with pegs, and with its insistence on keeping the pegs, have simply tied the noose around their own necks, trading monetary stability for, first, high financial fragility, and second, very probably long-term high unemployment and debt deflation in the private sector. This will probably result in waves of emigration, growing social problems, and the like. In other words, the costs have been shifted to the future, and they are more than likely to equal Greek troubles in fiscal terms. Estonia is Greece in disguise. It remains to be hoped that the EU and the IMF recognize that and refrain from simplistic fiscal retrenchment that makes problems only worse as the Greek domestic demand and, accordingly, government fiscal position will only weaken further. This results, as we have seen in Estonia, in real economic depression, which is GDP contraction in double digits.