FT made my day…
Très peu de pays ont appliqués des politiques libérales pour répondre à la crise à l'exception de la Pologne et de l'Australie en réalité plutôt épargnés. Même la Nouvelle-Zélande s'est engagée dans la voix du "stimulus debilus". Bref jusqu'à présent peu d'arguments empiriques pour répondre aux inepties keynésiennes. On se rappelle tous de pseudo économistes chez Calvi fustiger l'ignorance économique et les réponses neolibérales estoniennes de coupes des dépenses qui ne pouvait faire qu'empirer une situation déjà cataclysmique. Oui mais ça marche, l'extrême flexibilité et liberté de tous les marchés ont permis à ce pays d'ajuster sa structure de production à une vitesse inconcevable (merci la déflation). Les excuses monétaires sont également balayées. Bref je vous laisse lire l'article en question, je l'ai copié car il est visible pour les abonnés. Et encore une fois Krugman est humilié, délectable.
Estonia’s recovery defies economists and academics
By John Dizard
Published: August 1 2010 09:08 | Last updated: August 1 2010 09:08
“For the wisdom of this world is foolishness in God’s sight. As it is written: ‘He catches the wise in their craftiness.’ ” (1 Corinthians 3:19)
You can substitute “wisdom of economists” for “wisdom of this world” – as we have seen over the past couple of years. At the moment, for example, the wisdom of the world is that all is quiet in the euro-area, just as at the beginning of May it was well known that the currency area faced immediate doom.
Last year the wisdom of US economists, most notably Paul Krugman, was that the Baltic states would – apparently as one – descend into an accelerating spiral of disaster if they stuck to their policy of a fixed exchange rate with the euro. As he said in January of this year: “It might seem, given the account I’ve just provided [a ‘vicious circle of deleveraging’] that Latvia or Estonia should do anything possible to avoid devaluation. But that’s not right . . . the deleveraging crisis will be even worse if you don’t depreciate.”
Or maybe not. On July 13, Estonia formally received confirmation from the EU that it will be admitted to the eurozone at the beginning of next year. And, stubbornly failing to comply with the predictions of what are called the “third generation models” for currency crises, the country is already seeing a resumption of growth and a fall in its real cost of capital. The “internal devaluation” policy, which means cuts in nominal costs such as wages and rents, was very hard on the population, but appears to have worked ahead of even the Estonian government’s schedule.
Unemployment, while still high, peaked in the first quarter of this year. Optimistic locals point to the decline of “registered unemployed” from nearly 14 per cent of the workforce to just over 11.5 per cent in the past three months. Those are not, however, seasonally adjusted numbers, and it seems likely that sustainable declines in unemployment will be hard won. Private sector wages have stabilised after last year’s cuts of around one-fifth of pay packets. Manufacturing and service export growth is beginning to partially offset the collapse of the building sector.
The other Baltic states are not recovering as quickly as Estonia, though Lithuania seems to be doing better than Latvia. The differences among these small states have useful lessons for the southern Europeans.
Essentially, the Estonians are in position for a relatively rapid recovery because they started out with much less state and private debt than the others, and have been able to muster more political will to pay the social costs. The state and the public had less fixed debt to service with reduced incomes. The other Baltic states may take encouragement from the Estonians’ success. However, their much higher debt burdens, and, particularly in Latvia’s case, ethnically divided politics, make recovery far more difficult.
One of the points that the currency modellers in the academy may have missed about deleveraging is that it does eventually lead to lower capital costs.
That means that employers can have the same or lower unit costs for a given level of technology and output.
While unemployment is sticky, even in a liberal labour market such as Estonia’s, the country’s capital costs are already coming down dramatically. Commercial and industrial property prices have declined by 50 per cent from their 2007 peak. Local companies’ euro-denominated debt is also getting cheaper. As one large shareholder in several Estonian companies says, “At the beginning of 2009, the banks were offering our companies loans at 600 to 700 basis points above six-month euribor [the euro base rate]. That’s if the money was available at all; most of the time they were cutting lines. Now the banks are offering the same companies increased lines at 100 to 300 basis points over euribor.”
Even though the Estonian state is not borrowing in the international capital markets, there is a market in credit default swaps on the country. Estonian CDS spreads peaked in early 2009 at around 700bp for five-year euro risk; they are now down to around 100bp.
Less expensive debt is good; better would be new equity invested in expanding goods and services production. Estonia’s local equity market, while up over 30 per cent so far this year, is not broad or deep enough to finance the recovery. That will depend more on a continued revival in activity by foreign direct investors, such as outsourcing Finnish companies. The low in FDI was reached in the second quarter of last year, which, including reinvested earnings, was just €43m (£36m, $56m). By the second quarter of this year, that had recovered to €240m.
Swedbank, a large local lender, now estimates that gross domestic product will grow at a 4.5 per cent rate next year, up from 1.5 per cent this year.
Of course that comes after a decline of over 14 per cent in 2009. Still, given the high growth in the past decade, Estonia is already producing at the level it was in 2006.
My own view is that the more troubled euro members have too much debt, and not enough political consensus, to do similar “internal devaluations” without haircuts for the banks. The Estonians deserve respect for moderating their borrowing, ignoring their academic critics, and sticking with a difficult but now rewarding programme.
johndizard@hotmail.com
http://www.ft.com/cms/s/0/c4350686-9c01-11…144feab49a.html
