Banks brace for Latvia's collapse

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britinbe's picture
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Banks brace for Latvia's collapse

Ambrose's latest from the Telegraph....

Some of the comments are quite interesting

Broadspectrum's picture
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Re: Banks brace for Latvia's collapse

Thanks for bringing attention to this bad news.  It is the shape of things to come.  A girlfriend of mine came back a month ago from a trip to Lativa to visit her family.  She has a younger generation cousin that told her some very unusual things about home ownership over there and foreclousure and confirmed the large numbers of unemployed young persons.  All the reports I have read linked to from this site and on others in regards to the financial collapse in the Baltics and Latvia in particular were confirmed by her reports.  It goes to show you how the central banking virus infects and kills its host.  In this case very quickly.  Because just a few years ago all these young persons had jobs.

I also have a nephew that is involed with the importation of vodka from Latvia.  I expect an impact report from him in a day or two.  I suspect there is less to export due to local consumption. 

This is serious folks.


Gord.Barker's picture
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Re: Banks brace for Latvia's collapse

From Joel Sherwood  WSJ

STOCKHOLM -- Pressure is mounting on crisis-stricken Latvia after Sweden's finance minister said Tuesday he wanted to "send a clear signal" that the Baltic state won't get additional rescue-loan payments unless government spending is slashed further.

Continuing his recent stern rhetoric, Swedish Finance Minister Anders Borg told reporters in Stockholm that many have worked hard to help Latvia deal with its severe economic recession but that patience is wearing thin.

The country this year has needed to renegotiate its €7.5 billion ($10.99 billion) emergency-loan package, set up late last year with the International Monetary Fund, the European Union, Nordic countries and other bilateral lenders as Latvia tipped ito economic crisis.

"It would be very, very difficult to once again convince the world to provide the loan if Latvia doesn't fulfill the requirements," Mr. Borg said.

He said Nordic countries are due to lend about 10 billion Swedish kronor ($1.43 billion) to Latvia at the beginning of 2010 as part of the bailout plan.

"We can't pay out 10 billion kronor of taxpayer money with any less than complete fulfillment of loan conditions," said Mr. Borg, adding that the planned 325 million lats ($672.2 million) in cuts by Latvia's government for its 2010 budget was "significantly lower" than the 500 million lats that Riga agreed to this summer.

Also Tuesday, Fitch Ratings said Latvian failure to implement budget cuts and remain on track with its emergency loan program could lead to a downgrade. The company reiterated its double-B-plus, or junk status, rating on Latvia and kept its rating outlook at negative.

In Latvia, the government said Tuesday that it needs to delay submitting its 2010 budget proposal to parliament by nearly a week to Oct. 28.

Also, in a sign of the economic condition in the country, Latvian Prime Minister Valdis Dombrovskis asked his legal team to look into potential legislation that would limit mortgage borrowers' liability to the value of the collateral, not to the size of the loan, the prime minister's office said Tuesday.

The steps, which are only "an idea at this point" are needed to help borrowers who are finding it difficult to service their loans, said Liga Krapane, a spokeswoman for the prime minister.

While the legislation may take months to implement, analysts at Danske Bank were quick to voice concern over the potential changes in laws, which they called "draconian."

"This will, for all practical reasons, be a nonrecourse model, where mortgage borrowers can hand in the keys to the bank, and not be liable for anything," the Danske Bank analysts wrote in a research note.

They said the regulations would put banks in Latvia, which are mostly subsidiaries of Nordic banks, "in a very bad position" and would make currency devaluation less of a problem for Latvian citizens by reducing the devaluation effects.

Sweden's huge banking exposure to Latvia makes the Swedish krona highly sensitive to news from the Baltic state.

However, near 5 p.m. Stockholm time, the krona was holding on to the day's gains, with the euro down at 10.22 kronor from around 10.25 kronor in early trading. Similarly, the dollar was lower at 6.94 kronor from around 6.97 kronor.

Latvian Finance Minister Einars Repse said Tuesday that the country was working on further reductions in spending. "The government is on the right way in cutting the state budget expenditure," Mr. Repse said on the sidelines of the annual IMF and World Bank summit in Istanbul.

"Further budget-decrease process will depend on discussion between the government, prime minister and international lenders," he said.

idoctor's picture
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Re: Banks brace for Latvia's collapse

Youth unemployment in Latvia is already 31pc, and concentrated among ethnic Russians. Premier Valdis Dombrovskis said his chief task is to "preserve social peace".

Wow it can always be much worse. We need to be thankful we have had much better lives than so many. To bad we have squandered away so much so foolishly......easy come easy go. At least many of use took advantage of the good times & applied it to real things.

It is disturbing as this world destabilizes........general leads to more human stupidity of war.

John99's picture
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Re: Banks brace for Latvia's collapse

"Latvia has failed to deliver draconian spending cuts agreed to secure the next tranche of its €7.5bn (£6.85bn) bail-out from the EU, the International Monetary Fund, and Sweden, balking at 20pc cuts in pensions and a further 15pc cut in public wages."

This is the message I want to get across to the sheeple on my list - the IMF and company will be demading that soon every country lowers social benefits to all people, so that interest on money created out of thin air can feed the bankers.

The People's Party, the largest group in the coalition, voted against austerity measures last month, raising concerns that the country is ungovernable.

Or should it read, 'the country is resisting enslavement'.  A government by the people is not acceptable to the bankers.

Mr Borg said the world's patience is running out. "It will be very hard to continue with these international programmes if they don't fulfill the spirit and the content in the agreements they have signed."

We will threaten you and hurt you!

Latvia's economy contracted by 18.2pc in the twelve months to June, trumped only by Lithuania at 20.4pc. "Latvia's currency peg is back on the agenda, " said Hans Redeker from BNP Paribas. "The government has to relax policy for social reasons. The hardship this winter is going to be unbelievable."

The resultant reality. Our global banking system is pure evil.


Tapani's picture
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Re: Banks brace for Latvia's collapse

Latvia is also considering a law that sets a limit on debts to the current valuation of the house used as security. If such a law would be enacted in the rapidly deflating housing bubble, it would mean huge bank losses (many Swedish banks for instance).

A few years back Europe's most expensive apartments (per sq meter) were found in Riga, Latvia - so the bubble was particularily big there.


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