Iceland sinks further into crisis
Date created : Latest update :
After taking over two more of the country's biggest banks, the Icelandic government announced that negotiations with Russia over a four-billion euro loan would start Tuesday in Moscow.
STOCKHOLM/REYKJAVIK - The Icelandic central bank abandoned efforts to defend the country's currency on Wednesday and the government seized control of a second big bank as the global financial storm battered the island's economy.
Prime Minister Geir Haarde said
But he said assistance from the Fund was "definitely an option" and separately said negotiations to secure a 4 billion euro ($5.45 billion) loan from
"I'd like to underline that we have not, at this point at least, asked the IMF for a standby facility or an economic programme," Haarde told a news conference.
With two of the island's biggest banks now under state control, the market is focused on top bank Kaupthing to see if it can weather a crisis that threatens
Kaupthing was forced to take an emergency loan from
The Swedish central bank said it would lend the Swedish arm of Kaupthing up to 5 billion Swedish crowns ($702 million).
The Icelandic crown, hammered in recent days, plunged again and the central bank abandoned a two-day attempt to hold it at 131 per euro -- what Commerzbank called "the shortest peg in history".
"It has become clear that this rate has insufficient support. The bank will therefore make no further attempts in this regard for the time being," the central bank said.
In late European trade, the crown recovered and was being quoted by Icelandic banks back around 131.60, up 14 percent from the
BOOM AND BUST
Home to just 300,000 people, the
Now facing financial meltdown,
"We will do whatever it takes to protect our interests," Haarde said. "We will seek help if needed."
Later, speaking in a joint interview with news agencies, he sounded a contrite note after what has been a harrowing few days for the country.
"What we have learned from this whole exercise over the last few years is that it is not wise for a small country to try to take a leading role in international banking."
Journalists have descended on
"The situation is rather serious and quite scary and we just have to let these days pass and hope for the best," Sveinn Andri Sveinsson, a 45-year-old lawyer, told Reuters.
The financial regulator said Glitnir's operations in
Meanwhile, ING Direct, the online banking arm of ING Group, said it was acquiring more than 3 billion pounds ($5.3 billion) of British deposits from Icelandic online savings providers IceSave, owned by Landsbanki, and Kaupthing Edge.
But tension between
"We are taking legal action against the Icelandic authorities," British Prime Minister Gordon Brown told a news conference, as he announced the
The British Treasury said a Kaupthing unit in