Mike Collier in Riga -

When the market is depressed, there is no shortage of "buy one, get one free" offers in the shops. That was almost the feeling in Riga on February 1 when bne sat down for a cosy chat with Swedish Finance Minister Anders Borg and found Latvian Finance Minister Andris Vilks perched to his right, gratis.

Borg was in town to deliver a lecture at the Stockholm School of Economics in Riga (one of the top 20 business schools in Europe according to the Financial Times) titled "Resolving Europe's Economic Crisis" and took the opportunity to use Latvia as an example - to some extent - for the rest of the continent. "There were a lot of people thinking Latvia would become the next Argentina," Borg tells bne. "We can now see that did not turn out to be the case. I remember our own experience in the 1990s when they were saying we could not repeat what the Danes had done, because we were so welfare dependent. But we proved we could do the changes. The Danes, Swedes and Finns showed countries could restructure themselves. Then we heard the Latvians could not do it, that they would be Argentina. But that's not true - Latvia has turned out to be another Nordic country - a Nordic Baltic country that is ready to face its problems and deal with them."

"If I went to Wall Street or the City of London and said I'd just been to Latvia, two years ago people would ask me a hundred questions about how the crisis would develop and blow up. Today, they would say 'Yes, but you cannot compare Latvia and Greece because Latvians will deal with the problems.' That is when you start to get the credibility."

Vilks - who looks more Swedish than Borg - nods in agreement, but admits that the land of Aristotle, Socrates and Heraclitus may not be too keen on learning any lessons from Baltic shores. "We are doing a roadshow [about a future bond issue, starting February 7 in New York and finishing in London February 13] to meet investors and we're finding it's easier and easier because we have earned quite strong trust," Vilks says. "At the moment, there is an interesting situation where I am meeting Greek colleagues and trying to drop in a few details now and then that they can take from us, but they tend to shake their heads and wave their hands. But I understand it is not easy to take all that pain and make those decisions."

Economic credibility

But Borg is the main attraction today. He is an engaging speaker, though some in the audience may have been amused by the fact that on the same stage of the George Soros auditorium a year earlier, Swedish journalist Birgitta Forsberg (whose book "Free Fall" outlines Swedish culpability in the Latvian crisis), recounted some far less light-hearted calls from Borg to his Latvian colleagues as he tried to protect Swedish banks Swedbank and SEB (Vilks' former employer) from the fallout.

Rattling through his diagnosis of Europe's ills and his distinctly Nordic prescription for a cure, Borg used some striking statistics, such as a common-sense reminder that low profit margins tend to indicate high competition in a market place. His main message is that without economic credibility, Europe can never sort its problems out - a process which he believes will take decades.

It's difficult to categorise Borg as of the left or the right, which must be to his credit. One minute he's mocking the high number of sick days Scandinavians take despite their healthy lifestyles and great health services as a way of stressing the importance of increased competitiveness. The next moment he's talking about education as the "the best transfer system you can have."

His sternest words are reserved for the banking sector. "We've seen a banking sector with too much risk, too little capital, too weak owners, too weak management that has created excessive leverage, excessive risk taking, and had profit margins that cannot be sustained in future," he says. "Bank owners should know that if they mismanage their bank, it will be taken over and their capital will be wiped out."

"It is a business that will be changing, where the balance sheets will be cut down. This is probably one of the sectors of the European economy that will employ fewer people in the future than they have done. There has been an excessive financial sector that I think cannot be defended in terms of economic fundamentals."

The good news is that if Borg gets his way, after around a decade of reform banks an bankers might lose their current pariah status. "It will be more robust with more capital, lower return on capital... and much more prudent when it comes to risk management. Therefore I think they will make a much better contribution to society," Borg says.

Bankers as valued contributors to society? What a Swedish concept.