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IMF: Baltic states could follow Iceland's lead

More countries are at risk of following Iceland into bankruptcy, with the Baltic republics of Estonia, Latvia and Lithuania now looking particularly vulnerable, the International Monetary Fund warned.

Dominique Strauss-Kahn, managing director of the IMF, which was formally approached yesterday for assistance by Iceland, said: "The fallout for most banking systems in emerging and developing economies has been limited so far but signs of stress are growing, " The Independent writes.

Strauss-Kahn said some banks in eastern Europe have become increasingly exposed to struggling property markets, having raised funds on international money markets in the same way as the ill-fated Icelandic banks, now failed and nationalised.

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These banks may be forced to reduce credit and the risk of such a scenario has risen, for instance, in the Baltic states, where house prices and credit growth have fallen, Strauss-Kahn said. Unlike Iceland, Estonia, Latvia and Lithuania are full members of the EU, and may turn to the EU for help if their economies s begin to struggle.

Strauss-Kahn said the combination of tightening credit markets, rising domestic interest rates and the global growth slowdown could increase the force of the credit squeeze and rising defaults to a larger number of emerging markets and some developing countries. "Vulnerabilities are increasing and some countries with large current account deficits have had more difficulty financing them," he said.

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ADD YOUR COMMENT
no good eu
~yuval [16.10.2008, 00:09]
If you just copy and paste without any analysis you can derive at the conclusion that Iceland and the Baltic states are similar.
The Baltic countries have other big problems but not the kind that Iceland has, and no serious person can say something like IMF officials are supposed to have said.
bbn has now even less credibility.
~rigalars [15.10.2008, 10:08]
Iceland also got a 514 million euro loan from Sweden.
~Tallinn [14.10.2008, 18:24]
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