What went so wrong in Latvia?
As the European Parliament looks towards a rescue package for the stricken Latvian economy many people are now asking how the situation arose and the potential consequences for the rest of Europe. Latvia is a relatively small country although upon entry to the EU it did attract a significant number of investors, both short and long-term.
As a consequence there was a massive increase in house prices, general property prices and the economy was booming. However, unfortunately the vast majority of the rise was as a result of debt finance and as money markets around the world continue to operate at relatively low levels, compared to just two years ago, debts have got out of control for many people in Latvia.
As a consequence of growing debt and growing financial worries the economy has suffered which has placed many businesses on the verge of collapse. The Latvian government, once the darling of European investors, has now been cut adrift and is working with the International Monetary Fund with regards to a bailout.
Latvia is your stereotypical boom and bust new economy although in all honesty the collapse would have been nowhere near as brutal as we are seeing today, if we had not seen the credit crunch start in the US.
Share this..
Related stories
Another rates rise on the cards
The Bank of England has hinted that interest rates may have to rise again, if inflation is to be brought down to two per cent.The latest Quarterly Inflation Report said a rise in interest rates would help to curb the rate of inflation, which is predicted to grow because of more expensive oil prices and the impact of flooding on food prices. The report suggested that inflation could come back down...
Read MoreBankruptcy applications at record levels
Applications for bankruptcy in the UK hit record levels last year, government figures reveal. Over the course of 2007, 53,114 Briton submitted requests to go bankrupt, a slight rise from a figure of 52,717 during 2006. However, this represents a doubling of the number of bankruptcy applications witnessed in 2003. The rise this year has been attributed to consumers struggling to meet debt repayment...
Read MoreMore woes for UK travel industry
Last week's sudden demise of Flyglobespan has had an impact on the whole UK travel industry with news of further casualties over the last few days. UK travel outfit Allbury Travel Group, also trading as Libra Holidays, Argo Holidays and Jetlife has fallen by the wayside and there are fears this could be the first of many additional casualties over the festive period. So why has the sector suddenly...
Read MoreBank of England calls for more power
The UK regulatory framework for the financial sector looks like finding itself in the middle of a serious power struggle after the Bank of England announced that it would request more powers from the government to intervene directly in markets. This has the potential to put the Bank at odds with the FSA which for many years now has been the preferred regulator of the financial services market.
Stress impacts on UK economy
Stress and illness among employees has a direct impact on small businesses and the UK economy, it has been claimed.The UK's International Stress Management Association (ISMA) has suggested that small businesses suffer as a result of stress and illness among their staff and as such should do more to tackle the problem.Caroline Raymond, vice-chair of the organisation, commented that the impact on bu...
Read More