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Toughing It Out: How the Baltics Defied Predictions

Christoph Rosenberg, Advisor – European Department, wrote:

Two years ago, the eyes of the financial world were not on Europe’s Western periphery but on its North-Eastern corner. The three Baltic states—Estonia, Latvia and Lithuania—were among the first victims of the global financial crisis. …

The conventional wisdom at the time was that these three countries would have to give up their long-standing currency pegs against the euro and devalue. After all, this is what countries facing a trade and financial shock most often choose to do.

But the Baltic governments begged to differ. They opted to maintain their currency pegs and instead let their economies adjust through “internal devaluation”: a mix of budget and wage cuts, supported by financial and structural reforms. …

Read full article at seekingalpha.com

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Author:

I live in Germany.

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