Macro-economics, Investments, Law, and Power, with special emphasis on high finance and low humor.
By Aaron Eglitis June 4 (Bloomberg) -- Latvia’s central bank pledged todefend its currency’s peg to the euro as some investors shunnedassets linked to the Baltic nation on concern its economiccollapse will precipitate a devaluation. The bank “has explained and clearly said that it willmaintain the stability of the lats until the lats is replaced bythe euro,” it said in a statement on its Web site today. “It’sclear that such a mechanism as a fixed currency exchange rateallows the Bank of Latvia to achieve this policy.” The Baltic country, which is suffering the severestrecession in the European Union, is struggling to rein in itsbudget gap in order to secure the continued payment of aninternational bailout. Latvia’s economic collapse is threateningthe prospect of recovery in Sweden, known for its textbookhandling of its 1990s banking crisis, because the largest Nordicnation’s banks are the biggest in the Baltic region. The situation in Latvia is “markedly worrisome,” SwedishFinance Minister Anders Borg said in a statement on thegovernment’s Web site today. The economy shrank an annual 18percent in the first quarter. Credit-default swaps linked to Baltic government debt rosefor a second day today. Contracts on Latvia soared 60 basispoints to 735, the highest since April 28, according to CMADataVision prices at 12:20 p.m. in London. Default swaps linkedto Lithuania climbed 35 basis points to 485 and Estonia rose12.5 to 365.
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