The Dangers of Banking Interconnectedness During Times of Crisis: The Nordic-Baltic Case

Hilmar Þór Hilmarsson
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Hilmar Þór Hilmarsson: University of Akureyri, Iceland

Journal of Applied Management and Investments, 2020, vol. 9, issue 4, 153-161

Abstract: The Baltic States were hard-hit during the 2008/09 global economic and financial crisis. Cross border banking interlinkages complicated their crisis response. Fixed exchange rate policy became a condition for future euro adoption and also was an important element in rescuing Scandinavian banks from bankruptcy. Government debts rose sharply in the Baltics during the crisis and still remain much higher than they were pre-crisis. This experience shows how dangerous it can be for small states to relay almost solely on foreign banks from richer, more powerful countries. This case also shows how small states can be vulnerable in their dealings with supranational authorities in this case the EU that favours bank interests over those of the general public, including the poorest segments of the population in those countries.

Keywords: financial crisis; fiscal policy; monetary policy; Baltic States (search for similar items in EconPapers)
JEL-codes: J20 J21 J24 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ods:journl:v:9:y:2020:i:4:p:153-161

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