STOCKHOLM, Oct 5 (Reuters) - Shares in Swedish banks with big exposure to the Baltic states weakened on Monday, as did the the Swedish crown, after crisis-hit Latvia watered down promised spending cuts, raising concerns its currency might be devalued.
Latvia, suffering its worst recession since the 1990s, had told the International Monetary Fund and the European Union it would cut spending in 2010 by 500 million lats ($1.03 billion) in exchange for a 7.5 billion euro rescue package.
But on Saturday it said cuts would total only 225 million lats, prompting Swedish Finance Minister Anders Borg to warn international patience with Latvia was limited and that the country must deliver on its commitments.
The comments by Borg, whose country holds the rotating EU presidency, had fuelled concerns Latvia would find it hard to fulfill conditions for payments of remaining tranches of the IMF loan, a banking analyst said.
"It brings the devaluation scenario back to the fore and in that environment it gets tough, mainly for Swedbank but of course also for SEB," the analyst said.
Though Latvia is one of the smallest EU nations, its woes have caused concern in Sweden due to the exposure of its banks. Markets have also been rattled by fears of a devaluation in Latvia, whose lat is pegged to the euro.
Shares in Swedbank and SEB, which lent billions of euros in the Baltic region as the economy boomed earlier this decade, both fell around 3 percent by 1024 GMT.
A money market analyst said worries about the lat were weighing on the Swedish crown. "This could be the beginning of new Baltic tremors," the analyst said.
The crown traded at 10.27 to the euro at 1026 GMT after slipping to 10.31 earlier in the session and compared with 10.23 at Friday's close in Stockholm.
(Reporting by Johan Sennero and Sven Nordenstam, writing by Anna Ringstrom; editing by John Stonestreet)