Amid a Depression and Linked Heavily into Western Europe, Latvia's Government Collapses Today!

05/19/2010 05:12 am ET | Updated May 25, 2011

The People's Party, the largest group in a five-party coalition, walked out amid disputes over how to cope with the country's severe problems.

Unemployment has now hit 20 per cent and the economy contracted by 18
per cent last year.

The People's Party quit after its action plan failed to get the backing
of Valdis Dombrovskis, the Latvian prime minister, who labelled it

Mr Dombrovskis warned the People's Party's departure could cause yet
further economic instability.

"Any contradictions in the government are immediately reflected in the
financial markets, and they directly affect the fiscal stability our
country... a policy that is truly responsible for the country cannot be
self-centred," he said.

But he said remained confident that an emergency IMF bail-out worth
£6.7bn would remain unaffected by the political instability.

New Era, Mr Dombrovskis's party, confirmed it had already extended
invitations to other parties to join a new coalition in an attempt on
gain the majority in Latvia's 100-seat parliament.

It attempted to play down concerns about the prospect of a minority
government at the helm of country in severe economic turmoil.

Laila Dimrote, a spokeswoman for New Era, said: "This is not a big
deal. Latvia has had many minority governments in the past, and often
this is the case prior to elections."

Hopefully, subscribers and readers are taking full advantage of the
research at hand. This plays into the fact that Latvia, and its
neighboring countries, are
in a depression. This economic contagion will be both converted into
financial contagion through the banking system and transmitted as both
financial and economic contagion to the wealthier western countries that
have large economic claims on Latvia and do trade with them. 

Click to



Click any
graphic to enlarge...


For more opinion and analysis, see:


I will be publishing the foreign claims model (which will tie all of the
myriad global risks into one, cogent risk model) and my analysis of
Italy early next week for subscribers, along with a free accompanying
analysis for non-paying subscribers and readers.  Ireland, the UK and
Spain are on tap. Earlier installments of the Reggie Middleton's Pan-European Sovereign
Debt Crisis

1. The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

2. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect.

3. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.