The Economic Situation in the Baltics

[VetLegion]

Recently I've discovered an English-langugage site about the economies of Estonia, Latvia and Lithuania:

http://www.balticbusinessnews.com/Default2.aspx

It is a fascinating read at the moment, terrible and gripping at the same time. Like watching a car crash or something like that. The imperfect translations of the articles add to surreal effect.

Much of East and Southeast Europe is hit hardly by this crisis. I'm from Croatia and we're having trouble with our currency peg. Nothing dramatic yet, but reading the baltic news I feel like I'm reading about my country six months from now. Chilling.

Anyway, does anyone here follow the events unfolding up there?

It seems that Latvia is going to keep the currency peg with help from IMF. This of course means a painful deflation for them. Estonia is undertaking a deflation of its own in a similar attempt to keep the peg, though it hasn't required IMF help yet.

Some analysts predict that these attempts aren't going to last and when they devaluate they're going to go down 50%. What do you think?

[Saras]

I think there's going to be deflation here as well, but not as bad as in the north. Latvia is gone. Estonia will be mauled but will get up.

[Solver]

Latvia is in a crappy situation now. Economically, a deflation is expected. The situation is made further difficult, though, by the political climate. There was a riot last month (followed by one in Lithuania, too) and now the Latvian government isn't exactly stable either. A serious political crisis in the middle of all the economic trouble is quite possible.

Doesn't help that the people here are top European exports as far as wallowing in self-pity goes.

[onodera]

How much are your countries worth atm? Maybe we could buy one or two?..

[Solver]

Don't you still have some parts of the country that haven't heard of or felt "elektrifikacija vsej strani"?

[DanS]

Was the government in Latvia right or left?

[Solver]

How about "wrong"?

Firstly, the government is still here. Latvia has always had a right government since regaining independence, but as usually with Europe, this "right" would more accurately translate to American "left". The coalition parties are liberal, though some are the so-called Christian democrats or liberal conservatives, which means some socially conservative positions are held.

[onodera]

Don't you still have some parts of the country that haven't heard of or felt "elektrifikacija vsej strani"?

Yes, we do. By buying your country we'll actually increase average electrification of Russia. :P

[Saras]

How much are your countries worth atm? Maybe we could buy one or two?..

My seasoned M&A advice to Latvia - get other bidders, drag on the process and see Russia run out of cash

[VetLegion]

How about "wrong"?

Wrong in what respect? I've been reading about this topic and it seems to me little could have been done to avoid this crisis short of fighting tooth and nail against people who want to give you money at 4% interest. Not easy

[Solver]

That's just an instinctive reaction to a question of "is the government right..." I'm not particularly inclined to blame the government. While some things could be handled better, preventing an economic downslide is just outside the ream of possibility for them, and the all-time low popularity kind of goes with it.

[DanS]

When will we see some new faces on the scene?

[Agathon]

Is it true that you and the other Eastern European nations owe banks from Western Europe obscene amounts of money?

That's what I heard, from the Torygraph no less (that Throatwobbler-Mangrove dude - definitely a Tory). I also heard that if y'all can't pay, it will **** up the European banking sector to the max.

Is this true?

Gallows humour anyone?

[DanS]

IIUC, the Austrian banks are in deep.

[VetLegion]

Baltic countries owe money mostly to Swedish banks I think. The rest of East Europe and Southeast Europe are mostly covered by Austrian and Italian banks. Also some Greek banks.

I really don't know what to do. I have some savings in local currency which has been remarkably stable over the years, safe as a store of value, with very low inflation and a peg to the euro.

But seeing what is going on in other nearby countries (most of which devalued) I'm tempted to change my money into euros. On the other hand, I'm expecting euro to dive against the dollar any day now, so perhaps I should buy dollars or yen.

Dilemmas, dilemmas