GDP Convergence Stars Poland, Slovakia and Estonia worse off than Crisis Black Sheep Greece

Three countries have been heralded as economic success stories in recent years amongst Eastern EU member states: first Slovakia, then Poland, and recently Estonia. These economies are often discussed on business pages as being the convergence stars of Central and Eastern Europe. Other countries of the region have fared worse than them. A closer look at their actual economic development statistics reveals, however, that they are nothing more than hype.

Comparing their 2013 per capita GDP levels on purchasing power parity to the pre-crisis year of 2008, we find that Poland has increased by 24 percentage points, Estonia by 9, and Slovakia by 8. Thus only Poland seems to have achieved an outstanding result in terms of economic growth.

Does this growth translate into more jobs? Looking at Eurostat figures we find that the Polish employment rate remains unchanged since the beginning of the crisis, and the country had already had higher rates of employment at the end of the nineties than it does today after the much discussed “Polish miracle”. Both the Estonian and the Slovak rates are down by 4 percentage points since 2008. Slovakia had also had a higher employment level in the late nineties than it does today, and Estonia comparable. The economic take off measured in terms of GDP has clearly not resulted in more jobs for people, or catching up with high employment countries like Sweden, Denmark or Austria.

How about wages? After years of well publicised GDP growth, these countries have now officially converged with the southern European group (Greece, Portugal) in terms of GDP per capita on purchasing power parity. This is a success that EU officials never fail to mention. Yet this output convergence has not resulted in a convergence of living standards for those who do hold a job. Polish and Slovak wages are still about 2/3 of Greek wages on PPS, and Estonian wages half! The star students of economic convergence have wage levels that are drastically lower than the notorious collapsed economy of the EU, in spite of having reached a similar level of “development”…

If we add to this the fact that both Poland and Slovakia have achieved the output surge by massive increases in their level of indebtedness (12 percentage points for Poland and a staggering 27 for Slovakia), we become even more cautious. Even Estonia has managed to add about 6 percentage points, although they have negligible debt by international standards.

These countries are the stars. The others did not shine at all. It is time to rethink the Eastern European economic model, and not be blinded by the fake gold of GDP figures.

 

Fotocredit: Brooke Novak via flickr

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