Mary Stokes Goes On Eastern European Crisis Watch

Mary Stokes has a short entry at RGE Monitor today - Eastern Europe: On Crisis Watch. It is worth getting the full picture. But here is a short conclusion:

The extent of external imbalances ... are not the only determinants of the probability of getting into a financial crisis. But what the indicators ... do show is that countries in the region are extremely vulnerable to the drying-up of foreign capital inflows. That’s why the IIF’s projection that net private capital inflows will drop off from some $254 billion in 2008 to some $30 billion in 2009 is such a major concern. Moreover, given the similar vulnerabilities across the region, my concern is that a crisis in one country has the potential to blow up into a regional financial crisis.

The giant part of Latvian imbalances come from foreign trade, as describer in the previous post ...