Latvia warning sends shadow across Baltic’s booming economies

Standard and Poor's, the credit rating agency, downgraded its outlook for Latvia in February 2007 to negative from stable, saying there were 'clear signs of overheating' and an 'escalated risk of a hard landing' if no corrective action were taken.

Subsequently, Danske Bank, a Danish bank, issued a more disturbing analysis that claimed a crisis in Latvia could trigger contagion across the fast-growing Baltic states of Estonia and Lithuania into eastern Europe, reminiscent of the Asian crisis of 1997.

On 6 March 2007 Fitch Ratings said the Baltic economies were showing signs of overheating and a failure to take corrective policy action and re-establish credible euro adoption timetables could lead to future negative rating actions.

Fitch Ratings: Press Release, 6.3.07: Fitch: Risks Rising in the Baltic States http://www.fitchratings.com/corporate/events/press_releases_detail.cfm?pr_id=346484

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