[LINK] "Latvia’s crisis: the Swedish factor"

[rfmcdonald]

At Open Democracy, Mats Engström writes about Sweden's heavy involvement in Latvia's economy, rooted in long-standing historical factors.

In a recent walk through Stockholm's Old Town, I noticed a window-display where a copper-engraved map from 1635 showed a Baltic region where Swedish possessions stretched all along the coastline. One of them is Livonia, a territory now divided between Latvia and Estonia, which spent decades (1629-1721) under the Swedish crown.

Indeed, Sweden has been a strong regional power in the Baltic Sea area for centuries. During the 17th century, it was military power that allowed kings and queens in Stockholm to rule Riga and other cities on the sea's eastern shore. Swedish power in the region passed to Russia after the battle of Poltava in 1709, but now - after its three states regained independence after the fall of the Soviet Union, then joined the European Union in 2004 - Sweden is back.

In global terms, Sweden does not qualify even to be part of the Group of Twenty (G20); but regionally, it exerts a large economic influence. Swedish banks dominate the financial markets of Estonia, Latvia and Lithuania - and exposed these countries' vulnerability as the financial crisis accelerated throughout 2008. In Latvia, for example, these banks' excessive and irresponsible lending fuelled unsustainable private consumption and property prices. Now, the economy is in freefall.

The problem with this heavy engagement, Engström argues, is that Sweden concentrated excessively on intergovernment and business links, neglecting Latvian civil society and so missing out on signs that perhaps all wasn't well.