Event risk in the Baltics is critically high

This is the assessment of den Danske Bank as reported by Edward Hugh.  The last time I mentioned the Baltics was on May 12th in my post “A bearish view on Eastern Europe.”  I ended saying the Scandinavian banks’ exposure to the Baltics is just as worrying and should be the place to watch before we give a definitive all-clear.”  And that all-clear signal is far from coming.  In fact things seem to be reaching a critical state.

Here’s what den Danske Bank says:

The event risk has risen sharply in the Baltic markets and we advise utmost caution. Yesterday, the Swedish central bank Riksbanken said it will increase its currency reserve by SEK 100 bn through a loan from the Swedish debt agency. Investors seem to believe that this is a buffer to deal with potential problems arising from the Baltic crisis.

We should be watching these developments in Scandinavia and the Baltics because things have a way of metastasising in this globalized economy. Read more at the link below.


Danske Bank Warn On The Baltics – Edward Hugh

see also Devaluation Imminent in the Baltics? by Claus Vistesen (notice the allusions to Argentina, a comparison I made last July.

  1. Swedish Lex says


    The Swedish Government is calculating with (further) major banking losses coming from the Baltics and has consistently been building up a war chest to deal with it.

    The Government has also consistently kept the banks on a very short leash with the result that the Minister of Finance (formerly employed by one of the major banks) is hugely unpopular with the banks. The latter however know that they may soon have to return to sugar daddy for more and therefore remain polite.

    These developments will likely occur while Sweden holds the EU Presidency during the second half of this year. Expect a lot of drama in the coming months.

    1. Edward Harrison says

      Thanks for your insights, Swedish Lex. That gives some good colour to how this will play out politically. I see the Swiss Franc trade is bringing back the CEE issue as well. The stress from the Baltics and the CEE is going to be something to watch which could derail recovery.

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