North Europe: The most severe economic downturn in the history of European Union and its resilient recovery

With differing impact and scale, economic crises occur over and over again. Thus, it is not a matter for a country to be able to avoid the impact of a crisis, but rather to withstand and be resilient in times of a global or regional crisis. Economies are interrelated and economic slowdown in one place of the world or Europe impacts territories others. The scale of the financial crisis which hit the global economy in 2007 is without precedent in post‐war
economic history. It was preceded by a long period of rapid credit growth, low risk premiums, and the development of bubbles in the real estate sector. Financial institutions became vulnerable so that a downturn in a small corner of the financial system was sufficient to topple the whole structure. Heavy exposure of a number of EU countries to the US subprime problem was revealed in the summer of 2007 when BNP Paribas froze redemptions for three investment funds, citing its inability to value structured products. In the middle of 2008, the alarm bells began to ring in Europe and a systemic meltdown was around the corner: Lehman Brothers, the banks of Iceland, Latvijas Krajbanka and others were in need of rescue operations by governments. Some were saved before doing greater damage to the national economies whilst some were too far gone, bringing even Iceland to default.