“Iceland is bankrupt": Is Likely to Need I.M.F. Help

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Iceland, in Financial Collapse, Is Likely to Need I.M.F. Help

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Iceland’s financial system collapsed Thursday, and analysts said it was probably only a matter of time before the country would have to turn to the International Monetary Fund for help.

Such a move, which would make this small island nation the first sovereign state to fall victim to the credit squeeze that began last year, would require it to accept harsh measures to restore fiscal and monetary stability.

Iceland has tried desperately to avoid such a step. But the odds against it grew worse on Thursday when the government took over the last of three major banks and shut down the stock exchange.

Trading in the Icelandic krona ceased, with foreign banks no longer willing to take the currency — even at what seemed like bargain rates.

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@Robert Gentel,

Interestingly, it's been reported that Iceland is turning to Russia for financial help, not the US or the EU.

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@Merry Andrew,

The article says they asked for a 4 billion Euro loan from Russia and I'm sure they'd want to try less restrictive lenders before the I.M.F. I'm guessing they'll be stuck with the I.M.F though.

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@Robert Gentel,

Yah, that's my guess, too.

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@Robert Gentel,

Wow, I didn't think other countries had Republicans doing nothing but deregulating banks. That's how this happened right? By deregulating all the banks?

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If you rely on the only Icelander who's got street cred to rustle up funds from the IMF this way...

http://www.smh.com.au/ffximage/2005/07/03/bjork_wideweb__430x304.jpg

Give me some MONEY!!

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@McGentrix,

I'm not sure how well regulated their banks were, from what I've read it sounds like they were allowed too free a reign, but the contagion with the US banking system is likely the ultimate reason this happened. The problem didn't originae in Iceland, they were just too connected to where it did (in the US) and are tiny enough (population in the low 300,000's) to go down first.

Anywho, I came to post this about the Russia loan possibility:

Russia not yet ready to lend to Iceland

Quote:

Russia is not yet convinced it should make a loan to Iceland to help dig it out of a financial crisis, a Russian source said on Friday.

But as the island ran down more of its meager foreign reserves, Iceland said it hoped its biggest bank, Kaupthing, would next week be able to re-open its Luxembourg branch to pay back Belgian and Luxembourg depositors.

Two weeks after a banking collapse destroyed the value of its economy and currency, Iceland has still to decide whether to go to the International Monetary Fund (IMF) for help.

Prime Minister Geir Haarde said a decision was still expected within a week. In the meantime, talks with Russia this week on a loan have not yet led to a deal.

"At the current moment, we do not yet have enough reasons to give them credit," a senior Russian government source told Reuters. "We did not refuse. We are continuing the talks."

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Well Jeez, what's gonna happen to them? Not like they're all gonna be on the streets or throwing themselves off the highest building in Reykjavik.

The have enough stockpiled ice to last till the next Ice Age. Worst thing that could happen is that they decide to implement a more 'robust' form of capitalism - very popular with their ancestors:

http://lib.lbcc.edu/handouts/images/Vikings/vikings3.jpg

Early Scandanavian venture capitalists.

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“Iceland is bankrupt": Is Likely to Need I.M.F. Help

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