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

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

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.

Yah, that's my guess, too.

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?

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


Give me some MONEY!!

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

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:


Early Scandanavian venture capitalists.

cut and pasted from variouse creditable news sources

LEGAL action will be taken to claw back billions of pounds of British savers’ cash from collapsed Icelandic banks, the chief secretary to the Treasury has signalled.

Plans to pay back money lost in Icesave accounts were rejected for a second time by Icelanders in a referendum held over the weekend.

Danny Alexander called the development “disappointing” and said the government would use the European courts to reimburse Britons who lost money.

“It looks like this process will now end up in the courts,” he told BBC1’s Andrew Marr Show.

He added: “We have a obligation to people in this country who had saved with those banks, we have an obligation now to get that money back, and we will continue to pursue that until we do.”

About £3.5bn is owed to the UK and the Netherlands, who stepped in to compensate savers who lost money deposited in Icesave accounts.

Icelandic lender Landsbanki ran the accounts, but collapsed in 2008 along with two more of the country’s banks.

The British and Dutch governments had to reimburse 400,000 citizens when they lost their deposits.

Almost 60 per cent of voters in Iceland rejected repayment, backing the ‘no’ camp’s argument that taxpayers had no legal obligation to pay for a private bank’s losses. Those backing a ‘yes’ vote argued that repayment was the best way to resolve the issue in terms of cost and risk to Iceland.

Read more: http://www.metro.co.uk/news/860493-britain-sues-iceland-for-3-5billion-for-refusing-to-pay-back-bailout-cash#ixzz1JBnCCItM

with reference to my previous post and not knowing a hell of a lot about what terms the money was loaned on. It seems to me that if a lender lends money to a privatebank and that bank then goes belly up there doesnt seem to be any reason for the money to be paid back.

Am i reading something wrongly here?
Were there government guarentees applicable?

There was no explicit government guarantee, but Iceland as a member of EFTA has treaty obligations which include maintaining adequate reserves in a bank deposit insurance scheme. Theirs ran out of money, so British and Dutch authorities had to reimburse their own citizens for monies lost in the Icelandic banks' collapse - and then looked to Iceland for repayment. Iceland expects to recoup about 90% of what's due to depositors by liquidating the failed banks' assets, so the referendum result won't much affect ultimate reimbursement amounts whatever the EFTA court (in Luxemburg) decides.

Wow! That sounds like suing a city because they didn't prevent a robbery. Same kind of thinking, anyway, and it might put some insurance companies out of business.

Iceland only has about 300,000 people. They have agriculture, tourism, an educated population, airlines, shipping, industry, help from other Nordic countries - they'll manage. If you really want to worry about an economy a thousand times larger going into financial collapse read this excellent book:

http://www.amazon.com/Taxes-Spending-Governments-Towards-Bankruptcy/dp/0521869331

Thanks HS.

I'm still not sure why (private) banks seem to be a protected species where business is concerned. I guess because of the lessons learned from the depression.
risk - return.

Good reminder about scale factor...

Iceland is as populated as Saint Louis, Missouri..