(Adds Czech comment, details and background)
LONDON, March 5 (Reuters) - Sovereign ratings on Baltic
states Estonia, Latvia and Lithuania would improve if their euro
zone accession was accelerated in the face of the global
economic crisis, Standard & Poor's (S&P) said on Thursday.
The ratings agency also said efforts by the Czech Republic
and Poland to distinguish themselves from their economically
weaker neighbours were justified, adding it was confident in the
resilience of its Czech ratings.
"It's clear that if any of the Baltics were in the EMU
(European Monetary Union), their ratings would be higher as it
would eliminate their balance of payment crisis," said S&P
analyst Frank Gill in a telephone conference.
"The acceleration of (euro zone) membership would have a
positive impact on the ratings of these sovereigns."
He made no reference to any timetable for the three states
joining the single currency.
Even before the credit crunch worsened last year, the Baltic
states, which are already in ERM-2, had abandoned plans for
quick euro zone entry after inflation soared to double digits
during a credit-fuelled economic boom.
Analysts polled by Reuters in January gave a median forecast
of 2013 for the three Baltic states following Slovakia into the
euro.
Gill said Latvia -- whose credit rating was cut to "junk" BB+
status on Feb. 24 -- could see its sovereign rating raised by a
notch if it managed an orderly 15 percent devaluation of its lat
currency as part of joining the euro zone.
Latvia's lat is pegged to the euro at a central rate of
0.7028 lats. The country last week spent some 40 million euros
defending to defend the currency at that level -- the first
intervention since Latvia was bailed out by the International
Monetary Fund in December.
Gill noted that the Baltic economies had taken pro-active
measures to fend off the slowdown but said their outlook
remained poor due to a deteriorating external environment.
"We don't know how bad the external environment is going to
get," he added.
S&P has also put both Estonia and Lithuania on a negative
outlook. It has an "A" rating on Estonia and "BBB+" on
Lithuania.
The ratings agency rates 19 emerging European economies in
total, with 10 currently investment grade and 15 on negative
outlook.
Gill said S&P was confident that its Czech "A" rating and
"stable" outlook would prove resilient to the global economic
downturn as the country's weakening currency was making it more
competitive.
"Foreign debt in the Czech Republic is not related to
households. And corporate foreign debt makes up only 8 percent
of its total loan book. So the weakening crown actually helps
the economy become more competitive," he said.
He said both Polish and the Czech policymakers were right to
stress that their economies were stronger than their neighbours,
which are more exposed to foreign debt.
"There are different dynamics in these economies."
Gil also said Ukraine had more than sufficient reserves to
service its sovereign debt but noted that the refinancing risk
of its banking sector was enormous.
For a factbox on emerging European sovereign ratings []
(Reporting by Sebastian Tong; editing by Patrick Graham)
