Bloomberg News

Estonia’s Central Bank Says Debt Crisis Poses Growing Risk

October 26, 2011

Oct. 26 (Bloomberg) -- The spreading of Europe’s sovereign- debt crisis has “significantly” worsened the outlook for the global economy and risks for Estonia’s banking industry, the Estonian central bank said.

The crisis may spread to Estonia via Nordic parent banks, which control more than 90 percent of the local banking market, or through lower external demand, the central bank said in an e- mailed statement in Tallinn today. It reiterated the government should use its risk scenario, rather than a main scenario, in preparing the 2012 budget.

“The international financial environment has deteriorated significantly in recent months,” the bank said. “Whereas financial-market tensions used to be confined to just a few euro-area countries, the debt crisis has now spread further afield. This has been accompanied by a growing lack of confidence in the European banking system, which has resulted in disturbances in the functioning of the interbank loan market and it has become more difficult for banks to obtain financing in the bond market.”

--Editors: Alan Crosby, Douglas Lytle

-0- Oct/26/2011 07:55 GMT

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net -0- Oct/26/2011 07:50 GMT


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