The latvian response to its first economic crisis under a free market economy

Latvia was seriously hit by the economic crisis at the end of 2008. The national austerity measures introduced to combat the economic crisis were insufficient and the Republic of Latvia asked for the assistance of international donors. The International Monetary Fund, the EU, and Nordic countries lent an overall sum of €3.1 billion to the country during 2009–2011. After the reference to external aid, the Latvian government and parliament relied strongly on the argument that particular cuts and restrictions were dictated by international donors in order to defend national decisions for budget cuts. The cuts in the social security system concerned healthcare expenses and statutory social insurance allowances, including pensions. Parental allowances were also affected considerably, since, apart from the introduction of upper ceilings, the conditions of entitlement were also significantly altered. The provisions on cuts of old-age and service pensions as well as parental allowances were contested before the Constitutional Court. Based on fundamental rights and principles stemming from the Latvian Constitution, as well as on international human rights, the Constitutional Court ruled on the incompatibility of some of the measures with the Constitution.