The Baltic economies were the canary in the coalmine for the EU, sliding into recession months before Lehman Brothers met its fate. And that recession has been extreme in Latvia's case - by the end of 2009, its gross domestic product (GDP) was 23% smaller than when the decline began in the second quarter of 2008.
The country has slipped out of the headlines recently, largely thanks to an early call to the International Monetary Fund for a €1.7bn loan agreement, signed in December 2008. That deal and a strong policy response from a national unity government formed in March 2009 have stemmed speculative attacks on the Latvian lat's peg to the euro, at least for now. Maris Mancinskis, CEO of Swedbank in Latvia, says that local money market conditions have returned to relative normality, with interbank interest rates on the lat narrowing to about 300 basis points over those on the euro.
