Iceland Gets Bailout Loan… From Russia…

Russia to bail out Iceland?

In a televized press conference addressing the economic crisis in his country, Icelandic PM Geir Haarde announced that the Icelandic government has taken control of Landsbanki, Iceland’s second largest bank, and is getting a four billion euros (5.4 billion dollars) bailout loan from Russia.

Haarde said that “certain countries” had not met requests for aid in accepting currency swaps.

“The Nordic countries have stood by us, but other friends had not”, Haarde said, without naming names. “So we now have to find new friends”. A delegation is being dispatched to Russia to facilitate details of a bailout loan.

Vladamir Putin confirmed the Russian National Bank loan, with a maturity duration of 3 to 4 years. “This loan significantly bolsters the foreign exchange reserves of the central bank of Iceland and thus underpins the stability of the exchange rate of the krona,” said a Russian National Bank spokesman.

Haarde also announced several measures that will look to strengthen the Icelandic krona, which has lost more than 30 percent of its value against competing currencies in recent days. Haarde also explained that last week’s nationalization of Glitnir, Iceland’s third largest bank, was done to protect domestic savings accounts by separating the bank’s foreign investments from them. Haarde reassured the public that savings deposits made by Icelanders are protected.

Late Monday night, the Icelandic Parliament passed a new law enabling the government to take control of financial institutions and shareholders’ meetings, fire board members, take over assets, merge institutions, block the movement of funds and force institutions to declare bankruptcy. “There is a very real danger … that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy,” Haarde told the nation in a televised speech.

Foreign customers of IceSave, the online UK division of Landsbanki, were frozen out of their accounts today. Haarde had little to say about this development.

Trading in all financial shares, including all the major banks, remained suspended on the Reykjavik stock exchange Tuesday after a full day of non-trading Monday.


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