Latvia has become the first EU country to face a sovereign debt crisis after failing to sell a single bill at a treasury auction worth $100m (£61m), prompting fears of a fresh storm in Eastern Europe as capital flight tests currency pegs, The Telegraph reports.
The central bank has been burning reserves to defend the lat in Europe's Exchange Rate Mechanism, but markets doubt whether Latvia has the political will to carry through draconian cuts in spending - or whether such a policy even makes sense at this stage. Tremors hit bank shares in Stockholm and triggered a sharp fall in Sweden's krona. Swedbank, SEB and other Swedish banks have $75bn of exposure to the Baltic states, and face cliff-edge losses if the pegs snap. Full story...
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