Masthead graphic based on a painting by Gudrun Thriemer.

Sunday, June 07, 2009

Ambrose Evans-Pritchard, "Latvian debt crisis shakes Eastern Europe,", June 3, 2009.

Latvia has become the first EU country to face a sovereign debt crisis after failing to sell a single bill at a treasury auction worth $100m (£61m), prompting fears of a fresh storm in Eastern Europe as capital flight tests currency pegs.

The central bank has been burning reserves to defend the lat in Europe’s Exchange Rate Mechanism, but markets doubt whether Latvia has the political will to carry through draconian cuts in spending – or whether such a policy even makes sense at this stage.

  The finance ministry expects GDP to contract 18pc this year. House prices have fallen 50pc

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