Latvia

[HenryTo]

Looks like Latvia was the weakest link after all - although our eyes have not been focused on it too much given the small size of its economy. Hopefully, we don't have to explain why they're in a bind and need to choose one of the following: 1) Devalue or decouple its currency from the Euro, 2) Raise interest rates substantially (ala Paul Volcker style) and rinse inflation out of its system, all the while putting the option of devaluation on the table so as to discourage speculators from buying its currency to take advantage of higher interest rates.
---------------------------------------------------------------------------------
Latvia President Wants Wage Freeze
By JOEL SHERWOOD
September 22, 2007

STOCKHOLM -- Latvia's new president, Valdis Zatlers, is calling for a voluntary wage freeze in Latvia as the Baltic country's runaway inflation spurs worry and talk of devaluing its currency, which has been pegged to the euro since 2005.

Such a broad sacrifice would require massive public support, and the nation's trade unions seem likely to resist it. But with one of the highest inflation rates in Europe, a wage freeze is just one measure under consideration.

"The pace we're moving forward is too fast," Mr. Zatlers said in an interview on an official visit to Sweden. "If we're talking about freezing wages, they must be frozen in all sectors, not selectively."

Mr. Zatlers, a former surgeon with no previous experience as an elected politician and unaffiliated with a political party, took office July 8. Latvia's economic growth rate is one of the highest in the European Union this decade. Its 11.9% growth in 2006 was well above the 2.7% average for euro-zone countries. But inflation was at its highest level in a decade at 10.1% in August. Wages rose 33% in the second quarter. Linking its currency to the euro limits Latvia's ability to use interest rates to steer its economy.

As a result of Latvia's rapid growth, the broadest measure of its trade deficit -- the account deficit -- is nearly 30% of gross domestic product. A currency devaluation could help shrink that deficit -- making imports less attractive and exports more easily sold -- but could fuel more inflation.

Latvia originally aimed to adopt the euro, the currency shared by 13 other nations, by 2010, along with the other Baltic countries and Bulgaria and Romania.

But fears of an impending crisis are distracting the government from that goal. Devaluation would complicate the plans to adopt the euro.

"The imbalances are particularly acute in Latvia and there we see the highest risk of a possible devaluation of the currency in the future" says Raffaella Tenconi, an emerging markets economist at Dresdner Kleinwort, in a report on the Baltics.

Despite the threat to the economy, Latvia's unions are against a wage freeze, said Peteris Krigers, president of the Free Trade Union Confederation of Latvia.

Mr. Zatlers says an effort from all Latvian citizens is needed to combat the price-rise pressure. "We have come to the point where the population needs to understand that it's the responsibility of each person, each family, each company and each ministry."

Write to Joel Sherwood at joel.sherwood@dowjones.net

[HenryTo]

What a ride. Latvia sells a record amount of bonds at a rate that is 25 bps lower than expected.

http://www.businessweek.com/news/2012-02-16/latvia-to-finance-debt-deficit-with-record-bond-premier-says.html

[HenryTo]

Latvia still contracting but doesn't look like it will pose a systemic risk, for now:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aG1i82hqwSs0

[rffrydr]

Somebody's picking a bottom in Latvia:

TeliaSonera

Published: August 24 2009 09:36 | Last updated: August 24 2009 20:08

TeliaSonera, the Nordic telecoms operator owned 50 per cent by the Swedish and Finnish governments, is no stranger to speculative takeovers. Last year, it turned away an unsolicited $41bn offer by France Telecom. Now it is making an opportunistic bid of its own. Its $697m cash offer for the 40 per cent minority stakes in its Estonian and Lithuanian businesses is a bet these two Baltic economies have bottomed out, as have the share prices of its listed subsidiaries, Eesti Telekom and Teo.

Strategically, the move makes sense. TeliaSonera has a rag-bag of emerging market assets – from Turkey and Russia to Nepal – each with large, listed minority positions. Buying fast-growing telecoms operations in emerging markets is also in fashion: France Telecom is seeking to expand in Africa, as is Bharti Airtel. Taking full control of Eesti Telekom and Teo is a safer bet for TeliaSonera than splashing out on greenfield emerging market deals.
_________________
Today is the Tomorrow you worried about Yesterday!

[Stephan]

You have also to see that the EU is helping latvia, lithuania, Estonia und Hungary. As well as Bulgaria as Romania. It may sound huge but alltogether of them have a population of 50 million. So it is quite a burden for the EU but nothing of a concern of state bankruptcy. Although it is discussed if the countries shall devaluate their currencies which is quite a problem since many people are indebted in Euro and a devaluation break their neck (as the swedish, danish and austrian bank's loans portfolio's.
Greetings

[rffrydr]

The third way:

http://www.lankabusinessonline.com/fullstory.php?nid=955909581
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Latvia agrees to further budget cuts and should come to agreement with the IMF for further aid in the next couple of weeks. Lativa is still engaged in a vicious cycle and unsustainable situation - and I still believe devaluation will either occur later this year or early next year:

http://www.forbes.com/feeds/afx/2009/07/26/afx6700924.html

[HenryTo]

IMF imposes fresh conditions on Latvia. Devaluation still seems inevitable:

http://www.nytimes.com/2009/07/16/business/global/16latvia.html

[HenryTo]

Of course the Swedbank will stay in Latvia - they're too committed at this point and don't have the means to get out:

http://www.guardian.co.uk/business/feedarticle/8576077

[HenryTo]

IMF "hopes" Latvia will not devalue. Again, IMHO, the game is already over:

http://www.guardian.co.uk/business/feedarticle/8574431

[rffrydr]

The Argentine parallel? Moral, size does('nt) matter:

http://ftalphaville.ft.com/blog/2009/06/18/57916/latvia-more-parallels-with-argentina/
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Lativa devaluation averted for now - as the EU assures the country will receive its aid on a timely basis. But with the country continuing its economic spiral, it is not difficult to imagine a devaluation sometime later this summer:

http://www.guardian.co.uk/business/feedarticle/8567006

[HenryTo]

This couldn't come soon enough, but it may be too little, too late, as the country continues down an economic spiral:
-----------------------------------------------------------------------------------
Budget cut decisions prevent Latvian bankruptcy-PM
Fri Jun 12, 2009 12:56am EDT

Latvia has avoided bankruptcy after agreeing on budget savings to win further loans from the European Union and International Monetary Fund, the prime minister said on Friday.
Government parties and social partners agreed on Thursday on savings worth 500 million Latvian lats ($1.01 billion), including cuts in pensions and state salaries.

"Yes, with yesterday's decisions the state has really been saved from bankruptcy," Prime Minister Valdis Dombrovskis, who leads a five-party coalition, told public radio.

He said the government was looking at accelerating parliament approval of the budget, currently set for June 17, as lenders had said more funds could be given to Latvia after the budget had been backed in parliament.

[HenryTo]

You can pretty much stick a fork in it:

http://www.latimes.com/business/nationworld/wire/sns-ap-eu-baltics-nervous-neighbors,0,1576775.story

[HenryTo]

After discussing this for the last two years, devaluation in Latvia now seems inevitable:

http://www.nytimes.com/2009/06/05/business/global/05latvia.html?hpw