Latvia and Greece: Less is More

CEPS High-Level Brief, February 12, 2014

12 Pages Posted: 13 Feb 2014

See all articles by Michael Biggs

Michael Biggs

Deutsche Bank, London

Thomas Mayer

Centre for European Policy Studies (CEPS); Deutsche Bank, London

Date Written: February 12, 2014

Abstract

Despite considerable differences, there were also many similarities in economic performance between Latvia and Greece before their respective adjustment crises. After the immediate crisis, however, economic activity rebounded sharply in Latvia but continued to contract in Greece. This paper argues that this difference was due primarily to developments in credit. In Latvia credit growth fell sharply, and the economy was deleveraging aggressively by 2009. When the pace of deleveraging started to stabilise, the rebound in the credit impulse caused domestic demand growth to recover. Real GDP has increased about 20% since reaching its trough in the third quarter of 2009.

Keywords: Latvia, Greece, credit growth, economic performance

Suggested Citation

Biggs, Michael and Mayer, Thomas, Latvia and Greece: Less is More (February 12, 2014). CEPS High-Level Brief, February 12, 2014, Available at SSRN: https://ssrn.com/abstract=2395114

Michael Biggs

Deutsche Bank, London ( email )

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Thomas Mayer (Contact Author)

Centre for European Policy Studies (CEPS) ( email )

1 Place du Congres, 1000
Brussels, 1000
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Deutsche Bank, London ( email )

Winchester House
Great Winchester Street, 1
London EC2N 2DB
United States

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