2008–2010 Latvian financial crisis

The 2008 Latvian financial crisis, which stemmed from the global financial crisis of 2008–2009, was a major economic and political crisis in Latvia. The crisis was generated when an easy credit market burst, resulting in an unemployment crisis, along with the bankruptcy of many companies. Since 2010, economic activity has recovered and Latvia's economic growth rate was the fastest among the EU member states in the first three quarters of 2012.

In 2008, after years of booming economic success, the Latvian economy took one of the sharpest downturns in the world, picking up pace in the last quarter in which GDP contracted by 10.5%. In February 2009 the Latvian government asked the International Monetary Fund and the European Union for an emergency bailout loan of 7.5 billion Euros, while at the same time the government nationalized Parex Bank, the country's second largest bank.

On concerns of bankruptcy, Standard & Poors subsequently downgraded Latvia's credit rating to non-investment grade BB+, or "junk", its worst ever rating. Its rating was put on negative outlook, which indicates a possible further cut. On February 20 the Latvian coalition government headed by Prime Minister of Latvia Ivars Godmanis collapsed.

The Baltic States have been amongst the worst hit by the global financial crisis. In December 2008 the Latvian unemployment rate stood at 7%. By December 2009, the figure had risen to 22.8%. The number of unemployed has more than tripled since the onset of the crisis, giving Latvia the highest rate of unemployment growth in the EU. Early 2009 estimates predicted that the economy would contract by around 12% in 2009, but even those gloomy forecasts turned out to be too optimistic as the economy contracted by nearly 18% in the fourth quarter of 2009, showing little signs of recovery.

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