Latvia

Just months after an epic banking collapse forced Iceland into the arms of the International Monetary Fund, this island nation is locked in a fierce debate over how to pay off its creditors without ceding too much of its vaunted independence, The New York Times reported. The balance Iceland strikes between bowing to the policy demands of the global financial community and satisfying the desires of its increasingly resentful population of 300,000 will be closely watched as I.M.F. programs in beaten-down economies from Latvia and Ukraine to Hungary and Romania enter a crucial phase.

Lithuania’s economy plunged a preliminary 22.4 percent in the second quarter, the worst recession since 1990 independence, as output crashed and retail sales slumped, Bloomberg reported. The decline, the deepest in the European Union, compares with a revised 13.3 percent contraction in the first quarter, the Vilnius-based statistics office said in an e-mailed statement today. The economy grew 5.2 percent in the same period last year.

Swedish bank Skandinaviska Enskilda Banken said Monday that it swung to a second-quarter loss due to soaring bad debt charges in the Baltic countries and goodwill write-offs from its acquisitions in the region, MarketWatch reported. The group reported a net loss of 193 million Swedish kronor ($24.8 million) for the second quarter, compared to a profit of 2.81 billion kronor a year earlier. The loss was largely due to a surge in credit provisions -- or charges to cover customers who couldn't repay loans -- which jumped to 3.57 billion kronor from 448 million kronor.

The European Commission, the European Union’s executive branch, said Thursday that it would release badly needed funds to Latvia to help the struggling Baltic nation head off a collapse of its economy and maintain its currency link to the euro, The New York Times reported. The commission said in Brussels that it would release €1.2 billion ($1.7 billion), the second installment of a 7.5 billion euro financing package that the country secured in December with the European Union, the International Monetary Fund and other international lenders.

Shortly before the crash of Latvia’s Ogres Komercbanka, the bank's council chairman Arturs Jeresjko transferred his property to his family, Baltic Business News reported. A year ago Jeresjko was among 50 largest land owners in Latvia and was on the list of Latvian millionaires. According to the State Land Register, Jeresjko owned nearly 900 hectares of land last year.

Latvia faces bankruptcy in three months if it fails to deliver budget cuts required by the International Monetary Fund and the next installment of its bailout is delayed, Premier-designate Valdis Dombrovskis said. Latvia, in the grip of the severest crisis since independence in 1991, was granted a €7.5 billion ($9.5 billion) bailout last quarter after the economy shrank 10.5 percent and the state seized its second biggest bank. The government fell on Feb. 20 after agreeing to budget cuts needed to keep the deficit below 5 percent of gross domestic product.

Businessman Urmas Sõõrumaa and his partner Gunnar Kool’s plan to establish one of the leading luxury clothing and accessories chains in Eastern Europe has failed. Last week the court started bankruptcy proceedings for Versus Invest, Eesti Ekspress reported. Franchiser Versus Invest operated ten stores that sold clothing and accessories by Hugo Boss, Joop, Calvin Klein and Zegna. Six of them were in Estonia, one in Latvia and three in Belorussia. According to the plan, Versus Invest was supposed to open ten new stores during 2009.

Ukraine, once considered a worldwide symbol of an emerging, free-market democracy that had cast off authoritarianism, is teetering, The New York Times reported. And its predicament poses a real threat for other European economies and former Soviet republics. The sudden, violent protests that have erupted elsewhere in Eastern Europe seem imminent here now, too. World leaders are increasingly worried about the discontent and the financial crisis in Ukraine, which has 46 million people and a highly strategic location.

A group of multilateral lenders on Friday unveiled a lending package of up to €24.5 billion ($31 billion) to help central and eastern Europe’s battered banking systems weather the financial crisis, the Financial Times reported. The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank, which announced the package in London, hope the move will encourage the international banking groups that control most of the region’s banks to support their subsidiaries.

Moody's Investors Service placed the bond ratings of Estonia and Lithuania on review for possible downgrade Tuesday, citing severe deterioration in the regional macroeconomic environment. Analysts said a downgrade was likely. The three Baltic Sea-hugging neighbors Latvia, Lithuania and Estonia face an uphill struggle to resuscitate their economies, mired in recession or headed there, rein in their current-account deficits and maintain their currency pegs, MarketWatch reported. Within the emerging-markets universe, Eastern Europe is the region most vulnerable to economic and financial risk.