Bloomberg
Lithuania may have to raise the level of public debt to repay depositors of Bankas Snoras

DnB economist Jekaterina Rojaka:
Lithuania may need 1 billion euros ($1.33 billion) next year to make up for funds used to clean up after the collapse of Snoras, Lithuania’s fifth-largest bank by assets.

Lithuania may have to raise the level of public debt to repay depositors of Bankas Snoras AB, exacerbating an increase in financing costs caused by Europe’s sovereign-debt crisis.

The Baltic nation may need 1 billion euros ($1.33 billion) next year to make up for funds used to clean up after the collapse of Snoras, Lithuania’s fifth-largest bank by assets, said DnB Bank AB economist Jekaterina Rojaka. State debt may surge to 40 percent of economic output from 33.3 percent at the end of October at an “unfavorable time” as the crisis roils financial markets, she said.

“The pressure in the near-term is very strong because the government will be left with no reserves to refinance maturing debt,” Rojaka said. “The first half isn’t looking very cheerful for Lithuania.”

Lithuania, which experienced the world’s second-deepest recession in 2009 after Latvia, aims to cut the budget deficit to 2.8 percent of gross domestic product next year from 9.5 percent in 2009 as it looks to switch to the euro in 2014.

Read more: http://www.businessweek.com/news/2011-12-01/lithuania-borrowing-costs-to-surge-as-snoras-payments-boost-debt.html