ECB Gives Sweden EUR3 Billion Loan

"The European Central Bank (ECB) stepped in yesterday to help avert a Baltic financial crisis by lending EUR3 billion to the central bank in Sweden, whose banks dominate the region's financial sector. The ECB move signaled the Frankfurt institution's willingness to shore up official European help for countries such as Latvia, which is fighting to avoid a potentially disastrous devaluation of its currency. The EUR3 billion the ECB is supplying to the Riksbank will be used to boost the Swedish central bank's foreign reserves - increasing its firepower to help Swedish private sector banks if necessary...." [Financial Times/Factiva]

AFP adds that "...the move came amid mounting speculation that the financial crisis could force Latvia to devalue its currency, the lat, which is pegged to the euro. This would cause heavy losses for Swedish banks there. The Riksbank had earlier asked to borrow EUR9.2 billion in foreign currency from the Swedish National Debt Office to restore its foreign currency reserve.... Sweden, an EU member, borrowed the money from the ECB even though it is not part of the eurozone...." [Agence France Presse/Factiva]

The WSJ reports that European Commissioner for Economic and Monetary Affairs Joaquin Almunia "...said Wednesday that the bloc wants to avoid a devaluation of the Latvian currency 'at any price,' while a Swedish regulator said that country's banks were strong enough to withstand a blowout in the Baltic region, where they are heavily exposed. The comments bolstered currencies across Eastern Europe, which had fallen after Latvia last week attempted a failed bond auction and its currency, the lat, came under attack...." [The Wall Street Journal/Factiva]

Romania in line to receive EUR20 billion IMF package.

Romania could receive about €20bn in an International Monetary Fund-led (IMF) rescue package as the result of negotiations between Bucharest and the IMF due to resume tomorrow.

The multilateral support package, aimed at averting an economic crisis in one of the European Union's poorest member states, is likely to be similar in size to the €20 billion made available to Hungary in November, according to an official familiar with the issue.

A delegation from the IMF will arrive in Romania on Wednesday for a two-week visit to discuss a possible loan to the crisis-hit country, the IMF said.

'"The program would be part of a pro-active, insurance-based multilateral financing package to be supported by the EU and the World Bank, among other international financial institutions," it added.

Romania will also ask the EU for financial help to balance its budget this year, the EU's top economy official said on Monday. EU Economic and Monetary Affairs Commissioner Joaquin Almunia would not estimate how much Romania might need. The EU's 27 nations have up to €25 billion to lend to member states in trouble that don't use the euro currency. The bloc has already spent €9.6 billion bailing out Hungary and Latvia.