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

 
 
Reply Fri 10 Oct, 2008 01:49 am
Iceland, in Financial Collapse, Is Likely to Need I.M.F. Help

Quote:
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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Type: Discussion • Score: 5 • Views: 1,659 • Replies: 14
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Merry Andrew
 
  1  
Reply Fri 10 Oct, 2008 02:08 am
@Robert Gentel,
Interestingly, it's been reported that Iceland is turning to Russia for financial help, not the US or the EU.
Robert Gentel
 
  1  
Reply Fri 10 Oct, 2008 03:47 am
@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.
Merry Andrew
 
  1  
Reply Fri 10 Oct, 2008 05:23 am
@Robert Gentel,
Yah, that's my guess, too.
0 Replies
 
McGentrix
 
  -1  
Reply Fri 10 Oct, 2008 06:27 am
@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?
Mr Stillwater
 
  -1  
Reply Fri 10 Oct, 2008 05:00 pm
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!!
0 Replies
 
Robert Gentel
 
  1  
Reply Fri 17 Oct, 2008 06:18 pm
@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."
0 Replies
 
Mr Stillwater
 
  -1  
Reply Fri 17 Oct, 2008 08:48 pm
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.
0 Replies
 
dadpad
 
  1  
Reply Sun 10 Apr, 2011 11:28 pm
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
0 Replies
 
dadpad
 
  1  
Reply Sun 10 Apr, 2011 11:32 pm
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?
High Seas
 
  1  
Reply Mon 11 Apr, 2011 01:29 am
@dadpad,
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.
roger
 
  1  
Reply Mon 11 Apr, 2011 02:56 am
@High Seas,
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.
High Seas
 
  0  
Reply Mon 11 Apr, 2011 03:39 am
@roger,
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://ecx.images-amazon.com/images/I/41Ood-cZBYL._BO2,204,203,200_PIsitb-sticker-arrow-click,TopRight,35,-76_AA300_SH20_OU01_.jpg
http://www.amazon.com/Taxes-Spending-Governments-Towards-Bankruptcy/dp/0521869331

dadpad
 
  2  
Reply Mon 11 Apr, 2011 03:57 am
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.
0 Replies
 
Francis
 
  2  
Reply Mon 11 Apr, 2011 04:02 am
@High Seas,
Good reminder about scale factor...

Iceland is as populated as Saint Louis, Missouri..
0 Replies
 
 

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