Name: - Sameer Prasad

Roll No: - 82
Subject: - International Finance (305 FIN)
Under the Guidance of Dr. Mahima Singh
Latvia has become the second European Union country to seek the International
Monetary Fund’s (IMF) help to stabilize its financial system. It is also asking
for help from the European Union. The Latvian Prime Minister said the sum
needed would be decided by talks with the IMF and EU. Latvia has fallen into
recession and recently nationalized the country’s second largest bank. The
government invested $877 m in guarantees to its creditors. Latvia’s economy
which grew by 50% between 2004 and 2007 shrank 4.2% in the third quarter of
this year, the sharpest economic contraction in the European Union. The
Latvian government has already started talks with
the the European Commission the executive branch of the EU, on a possible
rescue package of its economy. The IMF has said it has $200 bn set aside to
help countries facing turn oil because of the current global financial crises. It
has also said it expects to provide help from some 24 countries. 

Questions: 

1] What measures can European Union take in order to undo the economic
contraction? 
An economic contraction is a decline in national output as measured by gross domestic
product. To undo economic contraction European union should increase purchasing power
into the economy to boost demand and smart investment is the second option to undo the
economic contraction. EU should take to Undo economic contraction are: 
 A regular watch on economic activities are taking right action at the right time
where we see that the economy has started to fall and will fall in declining the
future. 
 It In structure all 27 EU countries to much use of optimum resource available 
 It helps countries to bring new technologies in which it can uplift the poor
countries.

2] What is the role of IMF towards the country that have fallen into
recession?
 
IMF helps countries which have fallen into recession by offering loans, technical assistance
and surveillance of economic policies and IMF will help to rebuild or stabilize its currency,
re-establish economic growth and continue buying imports
Role of IMF towards the countries that have fallen into recession: 
 IMF provides fin3help by providing loans to the countries which fallen into
recession.  
 While in short It really helps to balance the country 
 IMF observes the economy of the country. 

3] Latvia should use financial aid: 

 It introduces new technologies into the market which really help the growth of the
industry. 
 It really creates new job opportunities. 
  It can also create people’s mind to invest and saving the money also introduce various
technical scheme. 
 It also helps the growth of small to medium or large scale of business. 

4] Explain the term Economical Recession in detail

 
Economic Recession is the condition where the economy is not really performing good result.
As the industrial has reduced unemployment has increased & the GDP has reduced for few
months. Therefore, the supply is more than demand. 0 
 LATIVA is one of the poorest states in the North Europe. EU consists of 27 countries
after Britain left in 2020. 
 Nationalization means taking control of Bank from the private sector. 
 A bank run occurs many customers of a bank or other financial Institution withdraw
their deposits simultaneously over the concerns of the bank’s solvency. Recessions is
for shorter time whereas contraction is the long duration of the recession. (According
to most economist, when a country real gross domestic product (GDP) the most
watched indicate of Economic contraction – has declined two or more consecutive
quarters, then a contraction has occurred. 
 
The EU’s economic and financial policies in the euro areas and the EU dim to: 
 
 Promote growth and employment. 
 Fiscal sustainability is the ability of a government to sustain its current
spending tax and other policies in the long run without treating. Government
solvency or defaulting on some of its Liabilities or promised expenditures. 
 Improve the efficient functioning of Economic and monetary union. 
 Promote Investment 
 Prevent or correct macro-economic imbalances 
 
A. The macro economic imbalances procedure was also introduced was also
introduced to monitor and correct potentially Problematic Economic trends in
Individual member states and prevent them from affecting others 
 Received financial and policy support. 
 Uses public guarantees to stimulate private investment