As Greece resists European demands for wider austerity measures, the contrast with the Baltic states couldn't be starker. Faced with similar market worries about their fiscal positions a year ago, Estonia, Lithuania and Latvia bit the bullet. Now there is light on the horizon: Standard & Poor's has lifted its rating outlook on all three to stable from negative, citing the successes achieved in fiscal consolidation. Greece should take note.
All three have retained effective currency pegs rather than take the option of devaluation. As a result, Estonia is still on track to join the euro in 2011; Lithuania successfully sold an international bond; and even Latvia, the hardest-hit of the three nations, may return to growth in 2010 after an 18%economic contraction in 2009. The cost of insuring all three's sovereign debts has remained stable this year, even as credit default swaps on other highly-indebted European governments soared amid fears of contagion from Greece.
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