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The Dangers of Banking Interconnectedness During Times of Crisis: The Nordic-Baltic Case

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  • Hilmar Þór Hilmarsson

    (University of Akureyri, Iceland)

Abstract

The Baltic States were hard-hit during the 2008/09 global economic and financial crisis. Cross border banking interlinkages complicated their crisis response. Fixed exchange rate policy became a condition for future euro adoption and also was an important element in rescuing Scandinavian banks from bankruptcy. Government debts rose sharply in the Baltics during the crisis and still remain much higher than they were pre-crisis. This experience shows how dangerous it can be for small states to relay almost solely on foreign banks from richer, more powerful countries. This case also shows how small states can be vulnerable in their dealings with supranational authorities in this case the EU that favours bank interests over those of the general public, including the poorest segments of the population in those countries.

Suggested Citation

  • Hilmar Þór Hilmarsson, 2020. "The Dangers of Banking Interconnectedness During Times of Crisis: The Nordic-Baltic Case," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 9(4), pages 153-161, December.
    • Handle: RePEc:ods:journl:v:9:y:2020:i:4:p:153-161
    as

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    File URL: http://www.jami.org.ua/Papers/JAMI_9_4_2020_153-161.pdf
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    References listed on IDEAS

    as
    1. Lars Jonung & Jaakko Kiander & Pentti Vartia, 2008. "The great financial crisis in Finland and Sweden - The dynamics of boom, bust and recovery, 1985-2000," European Economy - Economic Papers 2008 - 2015 350, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery: Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 325-388.
    3. Svend E Hougaard Jensen & Dirk Schoenmaker, 0. "Should Denmark and Sweden Join the Banking Union?," Journal of Financial Regulation, Oxford University Press, vol. 6(2), pages 317-326.
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    More about this item

    Keywords

    financial crisis; fiscal policy; monetary policy; Baltic States;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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