Given this bust and deflationary bailout, the size of consolidation following the collapse was massive: 17 percent of GDP in Latvia, 13 percent in Lithuania, and 9 percent in Estonia, with half of it enforced in the first year, and most of it, per Alesina's recommendations, on the expenditure side. Double-digit public-sector wage cuts became the norm across the REBLLs despite the IMF's then managing director Dominique Strauss Kahn protesting that, at least in the case of Romania, the government should have taxed the wealthy instead. Expenditure cuts of such magnitude wreaked havoc in health, education, and social protection. Taxes were increased, but only on regressive value added taxes (VAT) and labor taxes. Massive tax evasion predictably followed, which simply worsened the overall fiscal situation.

Mark Blyth, Austerity, loc. 602