Roubini: IMF Made A Mistake Allowing Latvia To Retain Its Euro Peg

According to BalticBusinessNews.com (BBN) the famous professor of University of New York Nouriel Roubini said:

“Given the economic conditions are getting worse, these pegs are under severe pressure and you have the beginning of a currency crisis,” said Roubini, who was in Moscow for a conference run by investment bank Troika Dialog. “A currency crisis becomes a banking crisis, a housing crisis, a sovereign debt crisis. It becomes a corporate crisis because each segment in these economies has a large amount of foreign liabilities.”
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“The large current-account deficits, fixed exchange-rate regimes and the terms of trade shocks -- emerging Europe is a recipe for disaster,” Roubini said. “The more you try to defend a peg that is unsustainable the more people attack you and the more you lose reserves.”
Roubini also said the IMF made a mistake allowing Latvia to retain its euro peg when it negotiated a bailout plan in December. The country will get 7.5 billion euros ($9.6 billion) from a group led by the Washington-based body, equivalent to about 34 percent of gross domestic product.
“The IMF made a mistake with the Latvia program of allowing them to keep the peg as it doesn’t make any sense because the currency is overvalued,” Roubini said.