Problems That Led To The Latvia Crisis

Submitted By Bethybaby
Words: 434
Pages: 2

Latvia Crisis
Sikeya Hawkins-Moore
Kaplan University
AB:220
Professor Epstein
02/16/2015

There were many problems that led to the monetary crisis in Latvia. One of the biggest problems came about in 2006 when “warnings of an over-heating economy” (Hill, 2013) the warnings seemed to be abundantly clear way before the recession and yet the government kept on going, this story suggest that the Latvian government hoped it would fix itself and sadly that was not the case. One of the problems that I felt lead to this disaster would be the government moving too fast in the very beginning, they found their independence and tried to establish themselves in the monetary big league at a fast pace. When it comes to money, especially countries money it is smart to take a slower pace and do what is best for the country itself and its people. When it comes to the wage cuts and sending the country into a deep recession, I am on the fence about the IMF and the role they played in hopes to fix the governments mistakes. When it comes to the “sharp cutbacks in government spending” (Hill, 2013) I feel that the IMF’s decision was spot on, the Latvian government needed the loan to fix their mistakes so they should adhere to the stipulations. The IMF has rules and guidelines and one specific part of their agreement, when they offer their services states: “Countries were to be allowed to borrow a limited amount from the IMF without adhering to any specific agreements. However, extensive drawings from IMF funds would require a country to agree to increasingly stringent IMF supervision” (Hill, 2013). With as much financial damage that was created, the…