As always, let's start with the pros of the government bailing out (nationalizing*) Parex bank, and just in general, bailing out businesses.
First, this is the only way that the bank can be kept alive. Since this was the largest nationally owned bank (one that is not a nordic immigrant bank), it would wreck the already weak Latvian economy, leaving irreversible effects on the Latvian, as well as possibly neighboring countries’ economies. This can be confirmed by a Moody’s report, saying that, "Latvia and Hungary were stabilizing but that their economies remained fragile. The problem is high debt levels, which is restraining consumer spending.” This means that if the Latvian government hadn’t bailed out the bank, and returned some money into circulation to cover debts, it would probably have left the Latvian economy in something far worse than the already present crisis, with the PPF* decreasing even more than it already had decreased.
Another positive thing about bailing out Pa
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To compare the economic transition for certain country, analyzing the economic factors such as unemployment (Percentage of people who don't have jobs out of total population), GDP per capita (Average income for each person) etc are necessary. Some country like Latvia, they completely finished their economic transition (change of economic system from command economy to free market economy) but they are having some economic depression or recession (when the economic growth rate goes down). If we just look at economic transition, Latvian economic transition is much successful than economic transition of Belarus. Even though progress of Latvian economic transition is faster than economic transition in Belarus, there is a huge problem in Latvian Economy.
When Latvia got an independence from U.S.S.R, Latvia government changed economy to Free Market Economy (There is no government intervention. People can produce and consume the product as much as they want). Unfortunately, this rapid tra
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The Parex Banka is a major Latvian bank in the mostly Scandinavian-controlled banking sector of Latvia. In 2008 the Latvian Government bought 51% of the bank’s shares for a symbolic payment of LVL 2,00. Large sums of money were invested into the bank in order for Parex Banka to be able to keep on working normally. In March of 2010 Latvia’s Government decided to take a new course concerning the case of Parex Banka. It was decided to split up the bank into a new "good” bank and to keep the old Parex Banka. "The existing Parex banka will continue to pursue some of its business activities, focusing primarily on recovering resources” (Artūrs Grants, source: Latvian Institute), however "the old Parex banka will not offer any new products or additional loans to the existing clients"(Matthew French, source: Latvian Institute). The new bank on the other hand will be sold to private investors, once the economic situation improves the bank is expected to make profits and should be able to repay t
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