Adjustment through the crisis: The case of Latvia

With the EU/IMF financial assistance programme to Latvia coming to its conclusion, this lunchtalk discussed Latvia's adjustment during the past three years and its prospects. The brief initial presentations by Sanita Bajare, Karlis Bauze , David Moore and Gabriele Giudice were followed by comments by John Fitzgerald and an open discussion chaired by Zsolt Darvas.

Following the burst of the credit and housing bubble and the sudden nationalisation of the largest domestically-owned bank, the Latvian authorities requested support from the EU and the IMF at the end of 2008. Since then Latvia has undergone remarkable adjustments: competitiveness has improved significantly in spite of a fixed exchange rate, economic growth has resumed, fiscal targets have been met and Latvia could tap the international markets in summer 2011. The massive fiscal and economic adjustments put Latvia on a good ground to fulfil the conditions to join the euro in 2014. But challenges remain: further consolidation is needed, unemployment is still high, and risks remain in the banking system.What lessons to draw from the Latvian adjustment? How could economic growth reappear when significant fiscal consolidation and private sector adjustment has taken place? Can the assistance programme to Latvia be considered a success?

Speakers

Sanita Bajare, Latvian Finance Ministry’s State Secretary - download her presentation here

Karlis Bauze is EFC Member, and Head of Monetary Policy at the Bank of Latvia - download his presentation here

David Moore is IMF Resident Representative in Latvia - download his presentation here

Gabriele Giudice is Head of Unit at DG ECFIN, European Commission, and EU Mission Chief for the Balance of Payment assistance to Latvia - download his presentation here

John Fitzgerald is Professor at The Economic and Social Research Institute

Event materials

Download the summary of the event here