Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Haunted By Austerity, Least-Indebted EU State Goes Big on Virus

Stock MarketsJun 01, 2020 12:27AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Haunted By Austerity, Least-Indebted EU State Goes Big on Virus

(Bloomberg) -- Memories of harsh austerity in the wake of the global financial crisis are motivating Estonia to end what’s been the continent’s greatest aversion to borrowing.

The Baltic region became the poster child for the kind of public spending and wage cuts that later ravaged nations like Greece. Estonia remains the European Union’s least-indebted member-state -- without a single government bond.

The Covid-19 pandemic is changing that, with a 10-year debt sale of at least 1 billion euros ($1.1 billion) due in the coming weeks. Another of a similar size is planned for the fall and a third is possible next year, with maturities of up to 15 years under discussion, according to Finance Minister Martin Helme. Money will be channeled into investment to boost economic growth.

“In the previous crisis, there were policy mistakes that deepened our recession,” he said in an interview in Tallinn. “This total austerity that was imposed very strictly then made the situation worse and we have to take a different approach.”

As well as contributing to the steepest recession in Estonia’s history, the post-2008 policies prompted an exodus of workers from the Baltic region to Europe’s west, where salaries are higher. Austerity -- which reached 9% of gross domestic product in 2009 -- also stoked resentment at home that facilitated the rise of right-wing parties like Helme’s EKRE, a junior partner in Estonia’s one-year-old government.

After adopting the euro in 2011, Estonia has increasingly debated whether it should borrow more for investment, with such calls intensifying after the European Central Bank first embarked on quantitative easing. Defenders of the country’s austere stance say the policies were justified to successfully join the euro region and boost exports, while it would have been tricky to borrow in Estonia’s old currency.

Helme said the pandemic made a bond sale “unavoidable” in the face of economic-rescue costs and lost tax revenue. But the change also reflects a view that this is the only way to close the wealth gap with richer neighbors more quickly.

“If other countries have over decades accelerated their economic growth this way, among other things by bringing investments forward through borrowing, I think we shouldn’t be ruling out this option due to some inflexible ideological denial,” Helme said.

©2020 Bloomberg L.P.

Haunted By Austerity, Least-Indebted EU State Goes Big on Virus

Related Articles

2 Dirt-Cheap Stocks That Could Skyrocket
2 Dirt-Cheap Stocks That Could Skyrocket By StockNews - Dec 03, 2021

The economic recovery has picked-up pace again, with the holiday shopping season now rolling. Consumer spending has increased despite inflationary pressure on prices. Furthermore,...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email