Former Satellites Causing Concern

Background

The financial crisis seems to be hitting former Soviet Union Satellites such as Latvia and Hungary the hardest. In 2004, Latvia and Hungary both joined the European Union. Since then, their developing economies have experienced astounding growth due to foreign investment. The Latvian and Hungarian economies are heavily export driven. Unfortunately, because of declining global demand and lack of credit, exports have dropped sharply, leading to near economic collapse. Rising unemployment compounded with decreasing wages have lead to widespread public upheaval.

Big Shocks from Small Countries

Latvian farmers recently protested over worsening economic situations which led to the resignation of Prime Minister Ivars Godmanis. Hungarian Prime Minister Ferenc Gyurcsany resigned a few days ago for similar reasons. Furthermore, Western European banks that invested in these countries fear that either country might go bankrupt. Defaulted loans could mean disaster for larger Swiss and Finnish bank that have lent vigorously to Eastern Europe. Europe is becoming more concerned, and the EU finds itself paying extra attention to unlikely countries in the East. Investors and businesses that bought heavily from Eastern Europe should not stop, but instead must continue to support these countries. For although they are small, another economic collapse will send strong ripples all across Europe and perhaps the world.