The center-right coalition government of Latvia became the second European government to collapse under the weight the international financial crisis Friday.
Iceland’s center-right government was the first to collapse. Latvia is the first in Eastern Europe, which is taking an especially-hard beating in the downturn. Like Iceland, Latvia saw unprecedented growth in the last decade, and along with neighboring Estonia and Lithuania became known as the “Baltic Tigers”. Latvia has been defanged, with its annual GDP falling 10.5% last month, and its overall economy is expected to shrink by 12% – 15% this year.
Also like Iceland, mass protests on the Latvian parliament preceded the government’s ouster. One such protest in January drew 10,000 people, which turned violent after riot police began using force to break up the peaceful protesters.
Latvia has already secured a €7.5 billion aid package from the European Union and IMF. Some analysts see this period as a necessary adjustment and is better that Latvia experience it now than prolong the pain through artificial stimulus. “It is better to take the [economic] blow immediately, than to have a long steady slide,” said Anders Aslund, senior fellow at the Peterson Institute for International Economics and an expert on the region.
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Latvia ir a R.I.P
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