Tag Archives: Baltic

Are People of Latvia Complete Idiots?

According to economists and government officials, the Latvian economy is in a state of rapid recovery and the country’s financial outlook is better than in many years. But the Latvian people see things completely different, according to the latest consumer confidence survey by the major Baltic bank, DnB NORD. And this puzzles the economic experts; either do the Latvians not understand how the economy works or they just don’t care, the officials conclude. 87% of the Latvian population are not satisfied with the government’s performance, 84% still finds it extremely difficult to find a job and more than half the population is thinking about leaving the country.

“Latvian economy right now produces positive and sometimes even super-positive hard data.”

Pēteris Strautiņš


The consumers confidence indicators for Latvia took the steepest dive in February since the end of 2008, according to the latest “DnB NORD Latvian barometer”. The survey displays drastic changes in public opinion with regard to all indicators related to economic development of the country, plummeting as rapidly as in the spring of 2009. Despite all encouraging public forecasts foretelling economic recovery, all measurable indicators of the survey after extended ascent have instantly returned to the position recorded one year ago. Economists and government officials are desperately trying to convince the Latvian population that the economy actually is recovering, and fast.

The drastic decline is observed in all indicators – without a single exception: Present and future outlook of the economic situation, present and future outlook of the family’s material standings, opinions on the government’s performance and chances to find a good employment.

The overall public sentiment index in February as compared to January has dropped from -36 to -44.

Particularly the decline by 12 points in the consumers assessment of the overall development scenario is remarkable. In other words; the number of residents who are of opinion that the situation in the country has taken wrong turn has grown considerably in February.

The only period the drop in this index has been bigger, was by the end of 2008 – down 16 points.

The number of residents in whose opinion the current economic situation is poor has also grown considerably: by 8 per cent points and has curtailed the share of respondents considering the current economic situation unaffected, i.e. neither deteriorating nor improving.

Likewise, the number of respondents considering that the economic situation will improve over the next 12 months has declined by 4 per centage points.

40% of the respondents are expecting that over the next year the situation may aggravate further.

Similar trends can be observed in the residents’ opinions on the present material standings of their families and forecasts in one-year prospective, DnB NORD writes in its report and consider the growth in pessimism as “moderate”.

84% of the Latvian population finds it currently extremely difficult to find employment.

The “Objective” Reality

However, one of the biggest declines in the department of constant indicators of “DnB NORD Latvian barometer” applies to the residents’ opinion on the performance of the current government.

87% of respondents are dissatisfied  with the government’s performance – up from 80% a month before. Moreover, particularly drastic differences display the estimation “very dissatisfied”, as in January such answer was chosen by 35%, whereas in February – by 43% of respondents.

(Positive assessment of the government performance has, in turn, dropped further by four percentage points.)

But here’s the funny stuff – the commentaries.

First: DnB NORD Banka’s expert of economics, Pēteris Strautiņš:

“Latvian economy right now produces positive and sometimes even super-positive “hard” data; e.g. in January the export of goods as compared to the last January has grown by 51%, which is the all-time record. Varying sentiments within the domestic market will not affect the export rates; however, exports can not be the only driving force of economic prosperity: domestic consumption also must display an ascending trend. Therefore, there still persists the peril that negative public sentiments may considerably impede improvement of the “objective” reality. This is why the observers of public processes should juggle, i.e. inform the general public about risks in gently and cautious manner to avoid any scary effects. Yet it actually almost precludes taking of strategically required decisions that might have unpleasant short-term consequences.”

Forgive me for not juggling the information, Mr. Strautiņš, but can you eat those super-positive hard data ?

And what exactly is the “objective” reality?

Anywayin the experts’ opinion, the pessimistic assessment of the overall situation is logically related to the results of the second part of “DnB NORD Latvian barometer” regarding the respondents’ views on emigration and the possible inflow of foreign workforce.

79% of all respondents admit that emigration of Latvian population seeking work and reside in other countries is a serious problem that bears long-term implications for the state future outlooks.

Here’s some more from the report:

  • Just the third position is occupied by overloading of the state social budget, as the persons remaining behind from their limited income must support incapable residents who are on the receiving side of pensions, allowances and other preferences paid out from the tax budget. Supportive of this opinion have been 55% of respondents.
  • Just slightly less – 52% of respondents have indicated that the emigration robs Latvia of capable and intelligent people who might facilitate the prosperity, should they stay.
  • Among other eventual loss one that has been stressed less frequently (by 18%) is the consideration that thus is lessened the pressure on the state government, as many dissatisfied persons leave.

Yet the experts point out that it does not mean that the menace of social conflicts has dissolved – most likely, on the contrary, DnB NORD writes.

“It is true enough that the people admit possible benefits from emigration as well: in addition to short-term gains, like subsiding of unemployment and poverty level, reinforced by additional funds let into Latvian economy by emigrants to support their families in Latvia, 37% of respondents have also indicated that departed persons acquire new competencies and expertise abroad to contribute to the development of Latvia in the future. At the same time more than 50% of all respondents have mentioned that their acquaintances who have left for other countries are still living and working there, whereas relatives or acquaintances of mere 29% of all respondents who have tried out this option have returned to Latvia. When asked to voice their opinion on emigrants 54% of respondents to “DnB NORD Latvian barometer” have asserted their support, 23% sympathy, and just 3% disapprove or can not understand such choice.”

Moreover, 32% of respondents have stated their readiness to leave for another country, as they either can not see any future perspectives in Latvia (15%), consider the local living conditions unbearable (14%), are convinced that in other countries is better social security (11%), or want to live in more civilized country (10%).

Among the reasons mentioned are also higher earnings in other countries.

Despite the fact that in other European countries, including one of the most popular destinations for Latvian emigrants, i.e. in Ireland is observed high level of unemployment, 45% of respondents reckon that their wages are still higher than in Latvia, and, should the efforts to find an employment fail, other countries provide by far better social guarantees (27%).

“One fifth of all respondents admit that anywhere would be better than in Latvia.”

However 24% acknowledge that there are economic problems in other countries as well, and therefore emigration might not offer the best solution to improve one’s financial standings.

When considering the prospective solutions to preclude emigration of capable workforce, the residents first of all have mentioned the necessity to facilitate entrepreneurship to create new workplaces – this opinion was supported by 67% of respondents to “DnB NORD Latvian barometer”.

At the same time, 51% as a solution have indicated reinforcing of social guarantees to the employed persons (37% have expressed similar opinion with regard to unemployed, indigent persons and other socially less secured groups), and 43% – the need to provide particular support to rural regions to motivate people to stay and work there.

“The need to stimulate national unity and harbor patriotism feelings in this regard was stressed by mere 7% of respondents.”

Unlike supportive or tolerant attitude towards emigrants much critical attitude in the survey was displayed against potential foreign immigrants who in the experts’ opinion may represent a solution for replacement of missing workforce following the economic recovery in Latvia.

21% subjectively do not support arrival of representatives of other nations and races with the intention to stay, 17% indicate that it might constitute menace to further existence of Latvian culture, whereas 22% speculate that it might further disturb already emasculated social budget.

Some third of respondents are of opinion that Latvia as a potential living and workplace would not be interesting to foreigners.

Well, here’s the Director of Market and Public Opinion Research Center “SKDS,” Arnis Kaktiņš, spinning the best he can:

“I must admit that I am surprised about the fact that the emigration problem at personal level is largely disregarded by the residents of Latvia. For instance, more than one half of the respondents (54%) admit that their initial reaction when thinking about people who leave Latvia is support, and only 1% disapprove of them. Unfortunately, it indicates that those who have decided to stay either are not quite aware of causal relations implicating that every capable person who has left Latvia means loss to everyone who has stayed behind, as it entails drop of the living standard in the future, or we have largely accepted and approved of seemingly inevitable fate – slow and dull extinction of both the state and the nation!

Jepp, either the people are stupid, or they just don’t give a damn… Well said.

And here is the social anthropologist Klāvs Sedlenieks:

“Currently there is no reason to assume that emigration might subside. However, positive changes could appear as soon as the government will disclose its resolution to facilitate entrepreneurship (instead of development of “trusted relative” business), thus implying shortly expected positive developments on the labor market. At the same time we should bear in mind that actually emigration blossomed even back then when the unemployment level in Latvia had reached its nadir. It also tallied with the actions of government that undermined the confidence level, and therefore fair and encouraging endeavors from its part may be of utter importance.”

Careful, Mr. Sedlenieks! transparency is a dangerous thing… juggle the information, remember?

Director of “EuroCivitas” political center, Viktors Makarovs makes the most sensible comment on the confidence drop, (according to this bloggers objective reality):

“Nearly all ratios of “DnB NORD Latvia barometer” are identical to those registered one year back; however their context most likely has changed. We are not on the verge of economical collapse, and budget consolidation measures are yesterday’s news, yet they have been topped by painful awareness of the fact that the present credit crunch is precursory to more profound long-term social and economic problems. The residents’ initial reaction to this awareness implies pessimism, helplessness and paralysis of acting capacities. The future will show, whether it is followed by resolution and courage to draw and realize long-term visions and solutions, or the general public would be doomed to fatality.”

People See Healthcare System As Expensive And Inefficient

According to the “DnB NORD Latvian barometer”, the country’s population is dissatisfied with the quality of the existing healthcare system, pointing out to its noncompliance with the actual needs and costliness of its services.

Moreover, in opinion of respondents, improvements can not only happen by additional funding, but rather by serious changes in the system itself.

(Boy, are they wrong!)

More than 80% of respondents believe that the healthcare system in Latvia does not satisfy the needs of general public, among main reasons behind its inefficiency mentioning costly medicine (72%) and medical services (67%), as well as lacking funding (64%).

Some of the respondents reckons the principal problem as never-ending changes within the system, and inconsistency in decisions (41%), as well as inadequate attitude towards patients by medical staff (38%).

When asked about  costliness of services and the medicine in particular the Director of “Ģimenes aptiekas” pharmacy chain, Ilgvars Ķipēns, explains the public opinion by comparing the accessible data on medication prices and wages in Latvia and other European countries:

“Several studies independently conducted by state authorities and private enterprises reveal that medication in Latvia on average is cheaper than in other countries of the European Union, whereas people are convinced about the opposite – 72% of respondents believe that we are the ones paying more on medicine. I think that underlying such assumption is the fact that locally the amount earmarked for medicine from the family’s budget pro rata is higher, as our wages are considerably lower as compared to mean European salaries. Average wages in Latvia according to the Central Bureau of Statistics amounts to approx. LVL 431 before taxes, meaning that the person is paid some 300 lats “in red”, whereas, for instance, in United Kingdom an employed person takes home 1,500 lats on average. Assuming that a remedy costs five lats and the price is equal both in here and in UK, the calculation reveals that Latvian pays for it 1.6% of the salary, whereas Englishman – mere 0.3%. The difference is enormous, and is causing the feeling that we pay more for medicine and other goods, even though the amounts are similar in terms of pricing.”

See! Stop whining!

When asked to assess the quality of the existing healthcare system and to think about possible improvements, more than one half or 58% respondents are convinced that the system must be subjected to radical changes, whereas 33% point out to the need to obtain higher financial assignments.

Yet, regardless of the wish to experience reforms within the healthcare system, more than one half of respondents are not supportive to the currently launched reform of hospitals, believing that its goals do not correspond with the best interests of the population, and other 43% reckon that its implementation is inefficient.

Chairman of the Board of “ARS” Medical Service Company, Māris Andersons, emphasises:

“Already now Latvia falls short of the criteria drawn by the European Union stipulating that emergency services should be accessible within the distance of 70 kilometres or paramedics should arrive within an hour after the call. If accessibility of medical assistance will deteriorate further, prevalence of neglected illnesses and the number of people in need of time-consuming therapy will grow (and treatment of neglected maladies is more costly from governmental point of view). Unfortunately, even actual trends are rather discouraging, as hospitals report that over the last year has drastically augmented the number of pathologies, whereas the number of Group I disabled persons has grown by 50%. Mind you that these people stand no chance in returning to the labour market.”

Hey! No scary stuff – Gently!

Many Latvians would gladly assume the responsibility for healthcare contributions, thus reducing payable taxes (43%), rather than pay higher tax to enable the government to provide wider range of state-paid services.

“Since people in Latvia mostly mistrust the taxation system as such (which was revealed by the precedent “DnB NORD Latvian barometer” survey), it is quite logical that the population would rather opt for greater self-responsibility for insurance and healthcare contributions. However, this assessment is not quite unbiased, as Latvians unfortunately are not accustomed to taking care of their own health or assume full responsibility for it.  Besides, to afford health insurance one needs rather high income the majority of population is unfortunately deprived of,” reasons the Chairperson of the Patients’ Ombud Office Liene Šulce.

The survey further detected that the majority of respondents tend to visit their family doctor only in case of serious illness or if self-treatment has failed (44%), as well as in emergency cases or to obtain the prescription for vital medication (40%). Mere 14% of respondents visit the doctor as soon as there appears the slightest concern about their health or that of their family members.

As one of principle obstacles that preclude from visiting the family doctor the population mention costliness of medical services (50%).

In turn, when assessing their relations with family doctor close to one half of respondents admit that they trust their physician (47%); 41% of respondents in case of health problems turn to their doctor in the first instance, whereas equal proportion of respondents mostly visit their family doctor to obtain assignments to specialists.

When asked about the doctors’ remuneration, this being the question that has stirred occasional public discussions at least over the last ten years, 31% respondents have specified that they are not actually aware of it, whereas 22% regard it as too low. 40% of the poll participants consider the remuneration of paramedics and medics more or less adequate to the current situation in Latvia (24%) or even higher than the average income of other specialists (16%).

“Due to unknown reasons there still persists the notion that doctors’ earnings are quite adequate, even though it is very well-known that taking into account the huge responsibility and knowledge that is tough to master physicians for a workload gain less than the average salary within the economy. Therefore, unanswered remains the question whether the people are aware of the fact that doctors mostly earn their wages being occupied in at least two workplaces and taking several workloads?” asks the President of Latvian Medical Association Pēteris Apinis.

In the “DnB NORD Latvian barometer” people are also asked to describe their position towards the questionable issue of gifts and unofficial payments to medical staff.

The results imply that 51% of respondents consider any further material gratitude in addition to the officially stipulated price for the service inappropriate, whereas 42% of respondents are supportive to at least small gift or presentation of cash.

Chairperson of the Patients’ Ombud Office, Liene Šulce, points out:

“As to the question of unofficial contributions, one must admit that the system and its quality will not improve as long as the people are ignorant of or refuse to accept the fact that such unofficial payments are absolutely unacceptable. It lies also within the responsibility of patients themselves – to abstain from illicit payments and report any requests of such, as well as to be aware that the provided services are covered from the state budget or one’s own pocket. This is the question of values; and let us hope that the situation will gradually change, as this soviet legacy seems embarrassing to many specialists from European countries. It should be advisable to explain to the population that there are also legitimate and positive ways of showing one’s gratitude. If the patient is well-off enough to afford monetary gratification to the medical institution it can be executed as official donation for its development, new equipment or staff bonuses.”

Online Medical Records Skepticism

Last, but not least the respondents have expressed their opinion on launching of electronic database providing for placement of medical records in Internet.

The majority or 58% of participants would object to inclusion of their information in databases due to disinclination to let anybody to read through their medical records.

(Now, ain’t that strange?!)

Supportive to e-healthcare project are 27% of respondents, believing that it would contribute to improvement of treatment quality.

The President of Latvian Association of Countryside Family Doctors, Līga Kozlovska, points out that medical records in Internet entails both ethical and patient’s rights issues, as any medical consultation to the patient actually is very intimate and privileged:

“Confidentiality is one of those factors that secure the patient’s confidence in the doctor, and no treatment can be efficient enough without confidence. Such database might be of assistance in some particularly complicated cases, and therefore all doctors should not gain access to the totality of medical records of every patient.”

Chairman of the Board of Medical Service Company “Mediconsult MS,” Māris Mežeckis, on the contrary, considers people’s’ concerns about placement of their information within unified database as “unfounded.”

“Appropriately executed digital patient’s card (or medical record) will be accessible to the doctor in charge only and just in case it is required for provision of medical services. State-of-the-art information technologies are advanced enough to secure that to no doctor save those directly involved in the treatment process is granted access to the information to make the system leak-proof and ensuring records on the information review history, so that in case of leakage one could easily track down the responsible persons,” explains the expert.

Hey, you Anonymous-people! Why don’t you give this Mežeckis-guy a lesson in state-of-the-art information technology?

Finally, a word from the CEO of DnB NORD banka, Andris Ozoliņš:

“In 2010, we saw gradual economic stabilisation and a new beginning of growth in Latvia, and I welcome the fact that many companies in Latvia which export or work for the domestic market decided to take advantage of the financing opportunities which are offered by DnB NORD Banka.  The same was true of individuals. I might also add that during the course of 2010, DnB NORD Group in Latvia managed to increase its market share in terms of lending and deposits.”

And how many new employees did you hire in 2010, Mr. Ozoliņš?


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Norway Takes Over Presidency Of Baltic Council

On July 1th 2010, Norway will take over the presidency over the Council of Baltic Sea States from Lithuania, according to representatives of the Lithuanian Ministry of Foreign Affairs.

The Lithuania-Nordic-Cross-Border Banking Flag

The Lithuania-Nordic-Cross-Border Banking Flag

The most important event during the period of Lithuanian chairmanship over the CBSS, was the meeting of the heads of the Council of Baltic Sea States that was held on June 1-2 in Vilnius and was one of the largest international events in Lithuania recently, The Baltic Course writes.

During the meeting, the Vilnius Declaration Baltic Sea Region Vision 2020″ was adopted that defines ecological, economic and social aspects of development in the region, and establishes political commitment to turn this vision into a reality, informed BC Lithuanian Foreign Ministry, The Baltic Course writes.

The Baltic Development Forum that took place simultaneously with the meeting of the heads of the Council of Baltic Sea States attracted the region’s business elite to Lithuania. At the forum, Lithuanian experience in overcoming the consequences of economic downturn and steps in addressing the current economic problems and using the experience of other countries were presented and discussed.

According to the representatives of the Ministry of Foreign Affairs, during the year of its presidency Lithuania mainly focused on promoting innovations, strengthening cooperation across borders, fostering a clean environment and ensuring of safe living conditions in the region. A number of events dedicated to these topics were held in Lithuania and abroad.

Credit Still Contracting

However, Lithuania’s recession is still ongoing, with domestic credit still contracting.

Domestic credit volume contracted by 244.8 million litas in Lithuania in May 2010: credit to general government diminished by 99.8 million litas, while credit to other residents went down by 145 million litas, of which lending to non-financial corporations and households went down respectively by 375.5 million litas and 95.2 million litas, while loans to financial intermediaries increased by 292.1 million litas, the Bank of Lithuania reports.

A year-on-year decrease in other monetary financial institutions’ (MFIs’) lending to non-financial corporations and households made up 9.8% and 4.8%, respectively.

Lending by other MFI’s to households shrank in May as follows: consumer loans went down by 47.4 million litas, lending for house purchase declined by 15.0 million litas, and other loans fell by 32.8 million litas. For the subsequent sixth month the annual growth rate of lending for house purchase was negative, making up –1.1% at the end of May.

Lending in euros prevailed in the lending structure of other MFIs by currency: by the end of May euro loans made up 69.5%, while litas loans made up 27.3%.

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Welcome To The Euro, Estonia! Here's Your 4,5% Extra Risk Premium

As some might have noticed, the euro zone – also known as EZ16 – has now become EZ17. It happened last week, as Estonia officially joined the European disaster zone. And the financial markets gave their official approval this week by kicking the price on Estonian CDS’ up by 4,45%. The Baltic Euro newbee moves straight in among the Top 8 countries with the highest risk of default.

“Joining the euro is a status issue for countries seeking to cement their position at Europe’s top table.”

Simon Tilford

The funniest thing is that the first, and almost the only, newspaper outside the Baltic region  reporting the historical event was The New York Times; on Thursday June 17th the representatives of the 27 European countries hailed the sound economic and financial policies that had been achieved by Estonia in recent years, and signed the paper that authorize Estonia to shift from the kroon to the euro on January 1th 2011.

For the leaders of the bloc, expanding the euro zone to 17 nations is tantamount to a show of confidence at an inauspicious time for the battered euro, which has lost about 13 percent of its value against the dollar since the beginning of the year, James Kanter writes in the NYT,

With a debt crisis that appears to be spreading from Greece to Spain, membership for the country, Estonia, might seem more like a curse than a blessing.

There has been speculations about the countries might change its mind and abandon the single currency, and some have doubts that Estonia is even ready for the move.

“Maintaining low inflation rates in Estonia will be very challenging,” the European Central Bank warned last month.

Still, the euro remains among the strongest currencies in the world, and membership opens the door to a club with global influence.

For small and unsure countries on the fringes of the European Union, it doesn’t get much better than this – no matter the mounting downsides for countries already on the inside.

Political Prestige

Estonia becomes the third ex-Communist state to make the switch to the euro, after Slovenia and Slovakia, and the first former Soviet republic to do so.

Membership is also an important signpost that a country is on the way to achieving Western European standards of living, an important goal for a former Soviet republic like Estonia that has long been eager to develop.

“It’s a great day for Estonia,” Andrus Ansip, the Estonian prime minister, told Latvian state radio in an interview.

“We prefer to be inside, to join the club, to be among decision makers.”

And Estonia’s central bank governor, Andres Lipstok, will now be able to take a seat on the European Central Bank’s powerful council that sets interest rates.

Sheer Bloody-Mindedness

“Joining the euro is a status issue for countries seeking to cement their position at Europe’s top table,” says Simon Tilford, chief economist for the Center for European Reform, a research organization based in London.

“But you also could call it sheer bloody-mindedness of Estonia to join now with the outlook for the currency so uncertain,” Tilford says according to NYT.

With a total output of about $17 billion, the Estonian economy is tiny.

It’s placed as the sixth poorest country among the (now) 28 EU nations.

Public debt in Estonia is currently estimated at an annual 7.2% of GDP –  a tiny deficit compared to most other countries in the bloc.

And right now it looks like the Estonian government will be able to keep its pledge to the euro.

But note; it looks like it.

According To Schedule

Just two days before the deal was to be sign in Brussels, the Estonian Ministry of Finance published it’s budget figures for the first five months of 2010.

The Ministry of Finance estimated that the Government sector budget deficit by the end of April was 5.1 billion kroons,  or 2.39% of the projected GDP of the year 2010, theBalticCource.com reports, quoting LETA/Postimees Online.

In five months of 2010 the State budget collected 32.5 billion kroons in revenue while the expenses amounted to 34.6 billion kroons.

The biggest State budget spending in five months are mainly social benefits – 15.3 billion kroons.

2.4 billion kroons were spent on investments. The payments on investments in the first few months of the year were by 10% higher than in the past couple of years due to improvements in the use of foreign aid.

Estonia’s operating expenses in total as well as the human resources spending have fallen, the Ministry of Finance says. And the State’s benefits paid to individuals, the private sector and to other Government authorities are on the same level as last year.

Now – compare that with the projections charted below:

The Estonian unemployment rate has increased by more than 150% between September 30th 2009 and February 19th 2010, to 14,3%, according to Index Mundi.

In addition, the Estonian credit agency, Krediidiinfo, estimates that the number of companies that will go bankrupt this year could amount to 1,700, especially in the construction business, accommodation business and catering business.

That’s up by 700, compared with the 1000 bankruptcies in 2009.

Just to put the topping on the cake; Estonian overdue loans rose in May to the highest level since at least 2008 as troubles in the commercial property industry outweighed improvements in mortgage asset quality, Bloomberg reports.

The share of loans overdue for more than 60 days rose to 7 percent of total credit issued to companies and individuals, compared with 6.7 percent in April, central bank says, according to the balticbusinessnews.com.

According To Schedule?

In For A Shock?

For the first time in many years, the average wages in Estonia fell (about 5%) in 2009.

Kalev Petti, head of research at Faktum & Ariko, says that othewise optimistic Estonians may become more pessimistic in January 2011 when Estonia adopts the euro.

“When the euro arrives, people and especially older population, will understand how poor they are.”

Petti says that while there were few other factors that are increasing pessimism among the older generation, it must be their feeling about the upcoming euro adoption and fear of prices continuing to rise. Pensioners are uneasy about the euro and the actual transition may cause psychological depression for many, the balticbusinessnews.com writes.

I guess the following statement made by Estonia’s prime minister, Andrus Ansip, in a radio interview will not help the situation:

“Our banknotes are more beautiful than euro banknotes.”

According to economists, the preparation to join the euro zone created some disadvantages for Estonia compared with neighboring countries, which enjoy a relative larger degree of flexibility by hanging on longer to their legacy currencies.

Wrong Place – Wrong Time

But that seems to be very, very short-term advantages.

Since last week the price of insuring the Estonian Medium Term Loans has jumped 4,45%, and the spread compared to German CDS’ has widened to nearly 8%.

The price on Estonian Sovereign CDS is now 113,01 basis points. That makes the insurance of Estonian government debt the sixth most expensive in Europe.

Source: Zero Hedge

Still, it a long way to go reach the Greek level that soared to nearly 1.000 basis points today.

Estonia is also an export-driven economy that quickly could be overshadowed by financial difficulties, particularly if the euro zone remains unstable, and neighboring countries like Poland and its Baltic neighbors insist on hanging on to their currencies.

“Investors will only be willing to lend to Estonia on favorable terms if Estonia can continue to compete,” Mr. Tilford, the London economist, says.

“That is where the biggest risks for Estonia now lie.”

Tallin In Trouble

And as all of the above is not enough; the Estonian capital – Tallin – is set to become the European Culture Capital in 2011.

But now, it turns out, that the city may lose 23.5 million kroon granted by the European Union because it has failed to provide Brussels guarantees for financing the culture capital programme, ERR reports, according to balticbusinessnews.com.

The so-called Mercour prize in the amout of 23.5 million kroons, a direct EU grant, has already been included in this year’s budget revenues of the city, but right now that payment is doubtful.

According to Brussels, if Tallinn wants to secure the funds it needs to submit guarantees by 28 June at the latest when Tallinn is visited by Sir Bob Scott, chairman of the assessment committee.

This is unlikely to happen since the government has not plans to issue any such guarantees before September.

Estonian Minister Laine Jänes, on the other hand, claims that the commission has been informed of such circumstances.

Welcome to the euro disaster zone, Estonia.

And good luck!

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