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Lithuania claims it does not need help

THE head of Lithuania's central bank yesterday downplayed concerns over a potential currency devaluation in neighboring Latvia and said his own country would not need an international bailout.

Reinoldijus Sarkinas, chairman of the Bank of Lithuania, said the country would not have to go to the International Monetary Fund for help. "I'm optimistic, and I think we will not go to the IMF for money. Lithuania is able to solve its problems without help from the fund," Sarkinas said.

The Baltic countries of Latvia, Lithuania and Estonia are undergoing a deep recession with rapidly shrinking output and soaring unemployment.

Sarkinas dismissed speculation about the stability of currencies in the Baltic region, sparked by the intense pressure on Latvia to stave off bankruptcy and avoid a sharp devaluation of its lat currency, which is pegged to the euro.

Latvia alright

"There is no need for Latvia to default, and I'm sure they are not going to do it," said Sarkinas. "I talk to my colleagues in the Bank of Latvia regularly, and what I hear makes me think they would not devalue the lat."

Latvia has the worst performing economy in the European Union, with output expected to shrink by nearly one-fifth this year. Many economists have predicted the country would devalue the lat to kick-start its economy through cheap exports.

Analysts say Estonia and Lithuania would then face pressure to follow suit.

"I see no reason why we should consider this step when we are sure that even (Latvia) is not going to do it," said Sarkinas, adding there would be only "losers" from a devaluation in the long run.

Speaking of Lithuania's own economy - which is expected to suffer a double-digit fall in gross domestic product this year - the bank chief said the key was to cut expenses.


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