Econintersect: An analysis (GEI Analysis) of the austerity program in Latvia (that has been cited by some as proof that countries can cut and deflate their way to prosperity) found that the results have been exceeded to the downside by only The Great Depression in the U.S. that started in 1929. And just as in the U.S. disaster of 80 years ago, Latvia is experiencing a series of bank runs. The latest this earlier this week came as Latvia’s largest bank, Swedbank, was scrambling to head off a run by depositors reacting to rumors that the bank was on the brink of failure. The bank has denied there is any problem and has managed to satisfy all withdrawal requests the rest of the week.
The reason for Latvians to be on edge is the collapse three weeks ago of Bankas Snoras AB. Arrest warrants have been issued for two major shareholders in that bank, Vladimir Antonov and Raimondas Baranauskas, who have reportedly fled to Russia. (Report by Bloomberg/Businessweek.)
Three years ago the country’s second largest bank, Parex Bank, entered technical default and had to be taken over by the government, which in turn forced Latvia to appeal to international creditors and the European Union for a €7.5 billion ($10.5 billion) bailout. (Report by Yahoo News/Associated Press.)
Monday an article is scheduled for GEI Investing which will give details of where bank withdrawals are being limited elsewhere in Europe.