Austerity increased rather than reduced debt in the Baltic states.

Evidence

Austerity is also supposed to reduce debt. In fact, that’s the whole point of it. Yet it didn’t do it in the REBLLs and it didn’t do it in the PIIGS. While all of the REBLLs had extremely low levels of debt—below 20 percent of GDP—going into the crisis, and had the advantage post-Vienna agreement of a sovereign bond market structure populated by patient (local or troika-tied foreign) investors who relieved bond market pressures, today they all have, with the exception of Estonia, more debt now than when they started, in some cases dramatically so. By comparison, imagine what would have happened if already high Greek or Italian debt levels were multiplied by four, as was Latvia’s debt when it rocketed from 10.7 percent of GDP in 2007 to 42 percent in 2012. Indeed, the REBLLs will be saddled with much higher debt levels for a long time because of their austerity. Far from blowing up the Debt Star, they have built themselves a bigger one. — Mark Blyth, Austerity, 608

Categorization

• XREF: Core empirical payoff for the whole book’s thesis that austerity is counterproductive; connects directly to Mattei’s critique of austerity’s promises. — connects to: The Baltic austerity ‘success stories’ grew from unstable credit-bubble economies — Mark Blyth, Austerity: The History of a Dangerous…, 603; Austerity cuts raised the debt-to-GDP ratios of Eurozone crisis states. — Mark Blyth, Austerity: The History of a Dangerous…, 30; Baltic export-led recoveries partly relied on neighbors’ demand, not austerity itself — Mark Blyth, Austerity: The History of a Dangerous…, 609
• SEED: The ‘Debt Star’ image — austerity as a policy that builds a bigger Death Star — is a vivid metaphor worth mining for a piece on why Beltway orthodoxy persists despite its failures.
• SHARE: Latvia’s debt quadrupling from 10.7 to 42 percent of GDP while being celebrated as the austerity poster child is exactly the kind of fact to send to someone tracking the Baltic economic debates.
• DEEPTHINKING: The inversion — that the countries with the lowest starting debt ended up saddled with the most additional debt precisely because of austerity — encapsulates the book’s whole argument in one falsifiable claim.

Broader Connections

• Austerity cuts raised the debt-to-GDP ratios of Eurozone crisis states. #exemplifies (0.90) — Mark Blyth, Austerity, 30
• Baltic export-led recoveries partly relied on neighbors’ demand, not austerity itself #qualifies (0.85) — Mark Blyth, Austerity, 609