Latvia facing bankruptcy?

The Baltic State of Latvia could go bankrupt within the next two years, according to Centre for Strategic Research...

Located in Northern Europe along the Baltic Sea, Latvia, which has a population of 1.3 million, has changed dramatically in recent years, drawing ever closer to Western Europe, both politically and economically, since gaining independence from the Soviet Union in 1991.

In May 2004, the country joined the EU and Nato, and hopes to complete its European transformation by adopting the euro over the next few years.

The country's positive transformation led to a substantial residential property boom.

According to property agents Knight Frank's global house price index, average residential property prices in the Latvian capital of Riga rose by 140per cent between 2004 and 2006.

However, the country's property bubble has since burst, with property prices recording spectacular double-digit price falls.

There were distinct signs of an overheated Latvian economy a year ago. Now, there are suggestions that Latvia could become the first victim of the financial crisis among the countries with transitional economies, given the country's negative payment balance and its heavy dependent on foreign capital flows.

Following a sharp increase in borrowing across the Baltic States, there are also fears that Lithuania and Estonia could follow Latvia's economic demise.

Source: www.homesoverseas.co.uk/news