Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries

Adjustment Under a Currency Peg: Estonia, Latvia and Lithuania During the Global Financial Crisis 2008-09

“…Although the drop of euro borrowing rates initially helped, the level of insolvencies rose quickly over the course of the year 16 and banks began proactively rescheduling debt. More generally, Baltic governments believed that debt resolution should be strictly left to debtors and creditors, reflecting their non-interventionist philosophy established in the years since 15 Private sector debt developments are discussed in detail by Herzberg (2010). 16 Most mortgages in the Baltics are at variable rates and indexed to 6 month EURIBOR, reset twice a year.…”