Latvia could carry out a controlled devaluation and still re-establish market confidence in it’s economy, according to Swedbank CFO Erkki Raasuke.
The banker told a Swedish newspaper an uncontrolled devaluation was likely to have a devastating effect, while a devaluation of the lat within limits set by the ERM2 currency grid would be easier to handle.
Mr Raasuke told the paper “If we believe Latvia really can carry out its reforms and eventually decides to devalue all at the same time, it could be limited within the confines of the ERM2 framework if they devalue by 15%” adding “In order to re-establish investor confidence, this can be done with help from the IMF and support from Nordic countries and the EU in a good and well-planned process.”
To qualify for the euro, which Latvia is keen to do, a country must stay in ERM2 for two years, trading within a band of plus or minus 15% around a central parity rate.
