You think the California budget cuts are harsh?
From Ambrose Evans-Pritchard yesterday:
Latvia has become the first EU country to face a sovereign debt crisis after failing to sell a single bill at a treasury auction worth $100m (£61m), prompting fears of a fresh storm in Eastern Europe as capital flight tests currency pegs.
If the US is finding it harder and more expensive to finance it’s debt (just have a look at treasury yield curves this year), then what hope does a tiny, massively overleveraged country like Latvia have?
The finance ministry expects GDP to contract 18pc this year. House prices have fallen 50pc , the world’s most spectacular crash. A third of the country’s teachers are being fired and public salaries will be slashed by up to 35pc to meet bail-out terms imposed by the IMF and the European Commission. The policy risks a deflation spiral that defeats its own purpose.
Wow…stunning what is happening to these small countries. Will it stop with the Latvia’s, Iceland’s, and Ireland’s, or are larger countries also at risk?
