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Bulgaria Credit Risk among Top 7 in Eastern Europe

Date: 24.11.2009

Slovakia, Poland, Bulgaria and the Czech Republic are among the seven countries showing the steepest increase in credit risk of 21 sovereign credit-default swaps.

The swaps are tracked by Bloomberg, and were reported in a Bloomberg article on Eastern European debt.

“The world is coming out of the doldrums, but Eastern Europe still has to burn off these higher debt levels, the external debt levels, and it will take longer to grow out of that. Swelling public deficits have forced European Union members, including Poland and Latvia, to shelve EUR adoption targets. Romania and Hungary have had to implement budget cuts that exacerbated their recessions to meet requirements for loans of EUR 20 B billion to finance their current- account and budget deficits,” Bloomberg points out.

Consumers and companies in Latvia, Lithuania, Estonia, Hungary, the Czech Republic and Poland borrowed in EUR, which carried lower interest rates than debt in their own currencies, after the countries joined the EU in 2004. Romania and Bulgaria followed suit in 2007, authors Tasneem Brogger and Agnes Lovasz explain.

Latvia, Lithuania, Estonia and Bulgaria all peg their currencies to the EUR. Maintaining those pegs proved costly as the governments cut budgets to satisfy EU rules, Bloomberg reminds.

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