By Patrick Lannin
RIGA - A top Latvian minister quit on Wednesday over spending cuts needed to secure vital financial aid, while neighbours Lithuania and Estonia also braced for austerity measures due to big economic slumps this year.
Having ridden credit booms to become some of the fastest growing economies in Europe, the three Baltic states are now facing deep recessions, slumping house prices and falling wages as they try to protect pressurised currency pegs.
The resignation of Latvia's health minister, a day after parliament approved deep spending cuts, added political tension to a budget crisis that shows little sign of easing. Without the cuts, Latvia would have endangered a crucial International Monetary Fund and the European Union package.
While many in markets believe Latvia for now has avoided a currency devaluation that threatened to cause market mayhem at home and abroad, few see signs that the region's economic misery will lift any time soon.
"These measures mean the man on the street is taking a lot of pressure for the readjustment -- probably too much," said Nigel Rendall, emerging foreign exchange strategist at Royal Bank of Canada. "It just won't be sustainable and in the long run I think we will still be looking at devaluation."
Latvian devaluation would likely promise a new round of market pressure on emerging European currencies, he said, likely forcing other Baltics to devalue as well as hitting units such as the Hungarian forint <EURHUF=>.
It would also make it even harder for Latvian borrowers to repay foreign currency loans from Nordic banks.
In a sign Latvia's woes are just an extreme version of those in all three of the small ex-Soviet Baltic states, Lithuania's Finance Ministry forecast the economy would slide 18.2 percent this year, more than the 10.5 percent drop previously forecast.
The Lithuanian government also said it would cut public sector wages by 10 percent to help fill a widening budget gap.
Latvia is planning a 20 percent cut in public sector salaries on top of a 20 percent reduction already agreed.
Pensions are also being cut by 10 percent.
Latvian health Minister Ivars Eglitis said he refused to make such cuts in spending in healthcare and quit.
Prime Minister Valdis Dombrovskis accepted the resignation.
"In this crisis situation the health minister has chosen the easier path because it is clear that the healthcare system faces difficult but immediate and decisive reforms," Dombrovskis said.
The government played down the impact of the resignation.
"The government continues to work and the resignation of one minister cannot affect its stability," said Liga Krapane, spokeswoman for Dombrovskis.
More pressure could come on Thursday, when unions plan to demonstrate against the cuts, though people so far have not protested and the five-party ruling coalition has held together.
REGIONAL SLUMP
Dombrovskis said earlier a final decision on further vital loans from the EU and IMF could come at the end of next week.
Money markets reflected cautious optimism the country will secure a 1.2 billion euro ($1.67 billion) tranche from a 7.5 billion euro rescue package agreed last year with the International Monetary Fund, European Union and other lenders.
Overnight Latvian interest rates were fixed at 1 percent/5 percent, little changed from Tuesday and levels above 20 percent last week. The lat was stable, with the euro quoted at 0.6987/97 versus a previous close of 0.6990.
The EU and IMF both called the fiscal package adopted by parliament on Tuesday "courageous" and said they would need to assess the budgetary measures over the next days.
The budget bill passed by parliament on Tuesday included a pledge to cut spending by a further 500 million lats in each of the next two years to get in shape for euro adoption in 2013.
The economies of Latvia and Lithuania are both forecast to drop about 18 percent this year, with Estonia about 13 percent.
In Vilnius, the Lithuanian government proposed cutting public sector employees wages by 10 percent to balance public finances. There are over 200,000 public sector employees, including teachers, doctors and police officers.
Like Latvia, Lithuania has a currency peg, though it has not sought IMF aid yet. The country is weighing possible cuts to parental leave benefits.
Prime Minister Andrius Kubilius was quoted by news portal Delfi as saying that without the spending cut measures the 2010 budget deficit could rise to 8 or 10 percent of GDP rather than be under 5 percent of GDP as previously said.
Estonian lawmakers were to hold a third and final reading of a new round of spending cuts on Thursday, although the central bank has warned the measures are not enough to keep the budget deficit in line with criteria needed for eventual euro entry.
Reporting by Peter Apps in London, Patrick Lannin in Riga, Nerijus Adomaitis in Vilnius and David Mardiste in Tallinn ; writing by Adam Cox ; Editing by Janet McBride
RBC Bank President Gordon Nixon - Salary $11.73 Million
$100,000 - MISTAKE (FISHERMEN'S LOAN)
I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.
There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.
Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:greg.grice@rbc.com
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:brian.conway@rbc.com
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:tammy.holland@rbc.com
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:beja.rodeck@rbc.com
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:ombudsman@rbc.com
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:ombudsman@obsi.ca
http://www.pfraser.blogspot.com
http://www.corporatebully.ca
http://www.youtube.com/CORPORATEBULLY
http://www.p2pnet.net/story/17877
"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"
Posted by: Paul Fraser | June 20, 2009 at 00:53