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Crisis management in the Baltic States

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  • Mező, Júlia
  • Bagi, Ágnes
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    Abstract

    The economic and financial recession started in 2008 brought serious difficulties for every European country, although not to the same extent. The previous situation of countries plays a major role in the course of the crisis and crisis management. The three Baltic countries showed a relatively prominent economic growth after their accession to the European Union in 2004. Their performance over these years often cited as Baltic Miracle. But this growth went hand in hand with serious macroeconomic imbalances, since the main moving factor of growth was the foreign direct investment flowing into the tertiary sector and the boom of internal consumption. These factors led to unsustainable current account deficit. The problems of these overheated economies would have needed solution even before the global downturn; however the recession put inevitable pressure on the Baltics to take actions. In the Baltic States most of the macroeconomic indicators deteriorated in the year 2008: GDP and consumer demand decreased, unemployment increased drastically, general government expenditures and government gross debt also grew. One of the most serious problems was the significant amount of debt denominated in foreign currency, which was responsible for the financial „bubbles” popped simultaneously with the outbreak of the crisis. The paper examines the main macroeconomic effects of the global economic crisis on the Baltic States and presents their governments’ economic policy measures taken to combat the crisis. The reactions of dealing with the recession in these three countries can be a lesson to other European countries as well.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40366.

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    Date of creation: 2012
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    Handle: RePEc:pra:mprapa:40366

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    Keywords: Baltic States; financial crisis; crisis management;

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    1. Val Samonis, 1995. "Transforming the Lithuanian Economy: from Moscow to Vilnius and from Plan to Market," CASE Network Studies and Analyses 0042, CASE-Center for Social and Economic Research.
    2. Jaan Masso & Kerly Krillo, 2011. "Labour Markets In The Baltic States During The Crisis 2008-2009: The Effect On Different Labour Market Groups," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 79, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Csaba, László, 2007. "Átmenet vagy spontán rend(etlenség)?
      [Transition or spontaneous order/disorder?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 757-773.
    4. Skribans, Valerijs, 2009. "Latvian and Europe construction comparison: stability and reasons of crisis," MPRA Paper 16370, University Library of Munich, Germany.
    5. John Lewis, 2010. "How has the financial crisis affected the Eurozone Accession Outlook in Central and Eastern Europe?," DNB Working Papers 253, Netherlands Central Bank, Research Department.
    6. Yoji Koyama, 2010. "Economic Crisis In New Eu Member States In Central And Eastern Europe: Focusing On Baltic States," Romanian Economic Business Review, Romanian-American University, vol. 5(3), pages 31-55, September.
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