Latvia's Story

After becoming independent from the Soviet Union in 1991, Latvia joined the European Union in 2004. Their economy in the middle of 2007 was of the fastest growing in Europe with GDP growing by 10%. After the crisis struck in 2008, Latvia took one of the greatest economic downfalls in world. The last quarter figures of GDP in 2008 showed a contraction of 10.5% in comparison to the figures from 2006. Through both 2008 and 2009 Latvia was regarded as one of the worst countries in Europe economically. 

Unemployment rose to 19.7% in 2009 and economic output fell by almost a quarter. The real-estate (consisting of buying, selling, or renting land, buildings or housing) bubble burst was one of the main causes of the Latvian economic crisis. Prices plummeted by up to a half in certain areas of the country.  

Since the crash and economic collapse Latvia have received bailout, an act of giving financial assistance to a failing business or economy to save it from collapse. For the first year of recovery, Greece -who will be discussed in tomorrow's blog- in fact were in a better state than Latvia. Austerity measures were introduced, the Latvian protests against it were never sizable in numbers. Even the national radical forces themselves couldn’t stage big enough protests. There was only one anti-governmental riot which took place on 13th January 2009. However, Latvia’s short term loss has lead to a long term benefit and what IMF quote as an “Incredibly impressive achievements”. They are now considered as one of the fastest growing economies with one of the highest GDP growth rates out all of European countries. 

After completing all Maastricht objectives in order to join the Euro they are set to become the 18th member on 1st January 2014 by giving up their currency, the Lat. Although Latvia have achieved such a success with their tough austerity measures, is joining the Euro really going to be an advantage to them? They already have the benefits of a single market through being part of EU so with what's happening in the Euro at this current time would it not be best to stick with the Lat? Only time shall tell.