Financial Armageddon in Sweden?
Personally having a Swedish bank account with SEB, and having recently visited the Latvian capital of Riga, this piece from Naked Capitalism hits home…literally.
According to the article, worsening financial conditions in Latvia could lead to an economic crisis and collapse similar to Iceland’s recent devaluation and potentially a major default.
The blowback would hit Sweden especially hard because its major banks have lent substantial funds to the Baltic nation. Latvian loans from Swedbank have totaled roughly 61 billion kroner, 40 billion kroner from SEB, and about 30 billion kroner from Nordea.
In addition, many Latvian businesses and individuals hold euro-denominated loans from the Swedish banks. In the event of devaluation those loans would become significantly more difficult for Latvians to pay back and could drastically increase the banks’ already high loan losses to date.
Latvia is currently facing a GDP that is on track to shrink by roughly 18 percent this year. More specifics are available from Naked Capitalism regarding the impact on Sweden of the troubled Baltic economies.