Estonia is suffering the worst inflation in the euro area, with consumer prices rising at an annual rate of nearly 22 percent, the Washington Post reported. This tiny Baltic nation, and its neighbors, Latvia and Lithuania, represent extreme examples of the price pressures sweeping Europe and confronting policymakers, executives and consumers with a challenge unseen for 40 years. Some Estonian employers must raise salaries several times each year. Others are retooling their operations to use less energy.
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Estonia’s president on Thursday tasked the leader of the main opposition party to form a new government, a day after Prime Minister Juri Ratas and his Cabinet stepped down in the wake of a corruption scandal in Ratas’ ruling Center Party, the Associated Press reported. Kaja Kallas, chairwoman of the center-right Reform Party that emerged as the winner of the 2019 general election, will have 14 days to put together a new Cabinet, President Kersti Kaljulaid said.
However bad a spiralling money laundering scandal has been to the three Baltic countries, it could get even worse. Financial regulators in Estonia and Latvia told the Financial Times they were afraid Swedish banks — which dominate both headlines on money laundering and their banking systems — could withdraw from the region, just as Danske Bank and Nordea have already done amid dirty money allegations, the Financial Times reported. “Sure, we are very worried,” said Peters Putnins, head of the Latvian regulator.
Danske Bank has been forced to close all operations in the Baltics and Russia in response to the largest money-laundering scandal, which has prompted EU authorities to launch an investigation of Danish and Estonian regulators. The bank was given eight months to return customer deposits and transfer its loan contracts to another provider in Estonia, after a report released last autumn revealed the extent of the failures at the bank, the Financial Times reported.
Furniture manufacturer Thulema filed itself for bankruptcy in Harju County Court today, saying that liquidity problems and difficult market situation makes it impossible for the company to meet its restructuring plan that was approved last October, reported aripaev.ee. The shareholders of Thulema are Finland's Puustelli Group with 29% of shares, BenSov OÜ (18%), Triomentor (35%) and Revalbonus (18%). The three last-named shareholders acquired a holding in Thulema in December 2009. As of April 30, Thulema's liabilities were 40.2 million kroon while assets were valued at 38.9 million kroons.
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As Greece resists European demands for wider austerity measures, the contrast with the Baltic states couldn't be starker, The Wall Street Journal reported. Faced with similar market worries about their fiscal positions a year ago, Estonia, Lithuania and Latvia bit the bullet. Now there is light on the horizon: Standard & Poor's has lifted its rating outlook on all three to stable from negative, citing the successes achieved in fiscal consolidation. Greece should take note. All three have retained effective currency pegs rather than take the option of devaluation.
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The tiny Baltic states have pursued closer integration with Europe with enormous zeal. But the price of monetary union may be giving them pause, The New York Times reported. Economists and ordinary citizens alike are watching the protests rumbling through the streets of Athens and the slow response to Greece’s problems coming out of Brussels. “Countries like Estonia and Latvia were once desperate to get in,” said Alf Vanags, director of the Baltic International Center for Economic Policy Studies in Riga.
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Swedish banking group SEB said on Tuesday it would inject more capital into its operations in Lithuania and Latvia due to rising bad loan provisions. SEB spokeswoman Viveka Hirdman-Ryrberg said the bank made 5.95 billion Swedish crowns ($847 million) of loan loss provisions in the first half of the year due to the global financial crisis. Lithuania's economy nosedived into its worst recession since early 1990s with gross domestic product falling 20.2 percent in the second quarter.
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Estonia's recession deepened in the second quarter, but the quarterly rate of decline eased, suggesting the country's economic fall may be bottoming out, The Wall Street Journal reported. The Baltic country's gross domestic product was 16.6% lower in the second quarter compared with the same quarter of 2008, Statistics Estonia said Wednesday. In the first quarter, economic output was down 15.1% from a year earlier. The national statistics agency said lower manufacturing and construction, due to reduced domestic and external demand, weighed on second-quarter output.
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Housing markets across Europe suffered steep declines in both prices and activity during 2008 and the situation isn't likely to improve much in 2009, according to an annual report published Thursday by the U.K.-based Royal Institution of Chartered Surveyors. A continued lack of mortgage-credit availability will keep European housing markets in the doldrums, the survey said. The report shows that while U.K.
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