Iceland teeters on the brink of bankruptcy

[w¡n9Nµ7 §£@¥€r 123]

REYKJAVIK, Iceland -- This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.

Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy - from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes - their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.

"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

...

Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.

...

Back home, the average family's wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.

But the whole system was built on a shaky foundation of foreign debt.

...

As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."

Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.

"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."

http://www.washingtonpost.com/wp-dyn/conte...0701879_pf.html

[jundp 191]

Ouch. I wonder what kind of impact this will have elsewhere?

[almaty 19]

LONDON (MarketWatch) -- Iceland's central bank said Russia has loaned the country 4 billion euros to help bolster its foreign exchange reserves. The move is aimed at supporting Iceland's krona, which has come under severe pressure because of the credit crisis. On Tuesday, Iceland seized control of Landsbanki, the country's second largest bank.

putin to the rescue..although russian economy suxs..and the gov't ahs to close down their stock market daily

[mawilson 2,133]

putin to the rescue..although russian economy suxs..and the gov't has to close down their stock market daily

Yah 'cause that's gonna stop the sell-off

[Otto 83]

It's a global banking/financial problem - keeps growing - nearly every bank/country is feeling the impact. Everyone scrambling to shore up their central/core banks.

[mawilson 2,133]

The link at the bottom of this page points to

Iceland best place to live, Africa worst: UN

Guess Iceland isn't the best place to live right now

[Peikko 1,575]

Heard a NPR program about this on the radio last night. The Icelandic people themselves are pretty sanguine about the medium/long term outcome. They are a small country with vast natural resources - yes, they got into trouble in the banking sector, but they definitely feel it looks worse than it is. Worry not Americans, you will probably not have to bail out Iceland as well.

[PlatyPius 5]

I've done my part for the economy of Iceland.... I bought another Björk CD......

[Peikko 1,575]

There you go, saved by Platy! No bailout required