‘A lat to worry about’

That’s the title of an analysis conducted by the FT staff on Latvia and its ailing economy.  It’s a double feature, with the other part of the analysis focusing on Argentina. Here’s an excerpt from the section on Latvia:

More is at stake than the fate of this EU country of 2.3m, which regained its independence from the Soviet Union in 1991. If Latvia succeeds, it would send a powerful signal that the ex-Communist countries, having endured the turmoil of that transformation, have the resilience to cope with the current global crisis.

But if Latvia fails, it could have a knock-on effect on other troubled economies in the region, particularly those with fixed exchange rates, such as Estonia, Lithuania and Bulgaria.

Around the globe, small and vulnerable countries are responding to the crisis with budget cuts. Unable to borrow their way out of trouble, as the US and the UK are trying to do, they are struggling to contain deficits by reducing public spending, including cutting pay bills by slashing government employee numbers. Some are resorting to radical measures. Iceland is preparing its biggest-ever budget overhaul. Lithuania is mulling introducing student fees. Estonia has postponed previously agreed increases in unemployment benefit. But no administration is going as far as Riga* in cutting actual pay.

Read the entire analysis from the FT HERE.

*Latvia’s capital city

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