Latvian officials insist they will not devalue the currency. If only the market believed them. Jitters began when Sweden’s central bank last week bolstered its foreign currency reserve by borrowing SKr100bn from the Swedish debt agency. That was seen as a buffer to support Swedish banks – which have $75bn exposure to Latvia, Lithuania and Estonia – should the Baltic states lose their battle to keep their currencies pegged to the euro. Meanwhile, Latvian officials warned its economy could shrink by a shocking 18 per cent this year. That would mean the budget deficit exceeding the limit agreed in an international bail-out in December – requiring more belt-tightening.

How much more can Latvians take? The country ran up Europe’s biggest current account deficit in 2007 as inflation and spiralling wages whacked its competitiveness. Now, determination to maintain the peg and keep open possible euro entry is forcing an agonising economic adjustment. That could mean the economy contracting by a quarter or more, from peak to trough.