News
27-10-2008 12:49 Latvia
Newspaper analyst: Baltic states face threats of bankruptcy
Baltic States Estonia, Latvia and Lithuania face threats of bankruptcy, Patricia Hedelius, analyst at Swedish daily Dagens Nyheter, writes.
The last seven years large loan festival in the Baltics is over. But the hangover will be left to hang for a while. And in the end, the bill could end up with Swedish bank customers, Hedelius writes.
According to her large Swedish banks Swedbank, SEB and Nordea are to be blamed for the situation as these banks have effectively taken on the role to be central banks of Baltic states. A role as the mismanagement. Instead of a necessary restrictive monetary policy, they have allowed lending to grow by 60-70 pct for several years in a row, an analyst writes.
Swedish banks have lent around SEK 380 billion in Baltic States. These loans have to be paid back in euros.
It is possible that Estonia and Latvia have to devaluate their currency because of amounting debt, Hedelius writes in her column.
In normal cases, the Baltic currencies lose their value. But because the countries have ambitions to join the single European currency they have fixed exchange rates.
Because of imbalances in the economy it is estimated the Baltic currencies to be overvalued by 15 percent.
To write down its own currency is in principle a political impossibility, but chances are that Estonia and Latvia will still be forced to devalue because few other actions carried out or may be implemented to remedy the problems, Hedelius writes.
As IMF and other foreign analyst, also Hedelius is states Baltic countries huge current account deficit, strong dependancy on foreign credits and real estate bubble.
Source: BBN |
