Nobel Prize winning economist Paul Krugman

In early June, Nobel Prize-winning economist Paul Krugman published a story “Estonian Rhapsody,” where he harshly criticized the country’s economic recovery. His remarks triggered outrage from the part of Estonians.

But Estonia’s President Toomas Hendrik Ilves was the most upset. He said the economist was being «smug, overbearing & patronizing» and did not know what he was talking about.

Now also the leading country’s businessmen, simple passer-buys and even the Finance Minister are slamming Krugman’s post, reports Bloomberg.

Commenting on Krugman’s criticism, Vaido Palmik, Estanc managing director, says: “It was like an attack on Estonian people. These times have been very difficult. People have kept together. And this Krugman took all these facts that he wanted.”

Nevertheless, Palmik agrees that Ilves could have hit back in a slightly milder manner.

He stresses that indeed the crisis brought some very hard times and the company, which makes high-pressure steel containers, suffered as well.

Estanc profits stagnated, the company postponed plans to double floor space and many of the country’s welders took the ferry ride to Finland to look for work there.

“But if you look back, the crash is very good,” he says.

In quite a short period of time, Estonia was back on track and the company started to flourish.

Estanc has increased its head count by more than a third in 2012. Palmik sells to Finland and Sweden; he wants to break into the German market and has moved forward with plans for expansion.

It should also be added that the author of the story says he once met a boy on the street, who said that Ilves might have been drunk when he published the posts. The journalist said that to the Estonian Finance Minister Jurgen Ligi, who answered: “I can suspect that Krugman was drunk.”

Meanwhile, Krugman says he had not expected such a harsh response from Ilves, who is after all a head of state. He claims he did not know that Ilves grew up in New Jersey, was educated at Columbia University in New York and speaks fluent English. Some say Krugman was not expecting any response at all.

Krugman is sometimes believed not to be particularly fond of the Baltics, because of his false predictions. He has been forced to admit that his statement that no Baltic country will recover before devaluing was wrong.

It is worth adding that back in 2009 when the crisis struck, Estonia launched severe austerity measures.

Estonia’s government froze pensions, cut state salaries by about 10 percent and raised the value-added tax by 2 percentage points.

Ref: 105.105.105.1916