UPDATE: Latvia Fails To Sell Any Govt Debt Securities
(Adds detail, market reaction, analyst comments.)LONDON (Dow Jones)--The financial crisis in Latvia escalated further Wednesday after the treasury failed to sell any of its debt securities on offer at an auction, adding to expectations that the country may be forced into an imminent devaluation of its currency, the lat.
The treasury failed to sell an offered 20 million lats ($40 million) worth of paper maturing in July, as well as LVL10 million maturing in September, LVL10 million due to mature in December and LVL10 million maturing in June next year, according to an announcement on Latvia's main stock exchange.
Following on from a sharp move higher in the overnight interbank lending rate and recent reserve losses for Latvia's central bank, the failed auction is the latest sign that the country's currency peg to the euro may be under imminent threat, despite official denials from the authorities in Latvia.
"Against the backdrop of a potentially near double-digit fiscal deficit in 2009, clearly this failure goes to the heart of Latvia's vulnerabilities and starts to more meaningfully diminish the government's ability to hold out [against a currency devaluation]," said Gyula Toth, an analyst at UniCredit.
Stocks in Swedish banks - prominent foreign-currency lenders in Latvia - fell sharply Wednesday afternoon as traders betted that the lat's peg to the euro will break, effectively forcing up debt repayments for Latvian people and businesses....MORE
Focusing a bit farther south:
Eastern Europe: Zloty, Koruna, Ruble Hunky Dory, Switzerland threatened with bankruptcy
Who falls faster, Europe or Asia?
UBS on Eastern Europe: Move Along, Nothing to See Here
Creditanstalt Redux?: Failure to save East Europe will lead to worldwide meltdown
And a look back to Sunday's parade in Riga:Der Spiegel:
Blonde Parade Lifts Spirits in Gloomy Latvia
Many of the women were followed closely by enthusiastic musicians.