October 8, 2008

Icelandic Economy Headed for Deep Freeze?

Iceland is selling off foreign-owned assets in an attempt to ward off national bankruptcy.

An article in the Telegraph newspaper said all of Iceland’s banks and investment firms have been blocked from the national stock market and urged to get rid of overseas investments and assets.

Iceland’s currency — the Krona — has lost “more than half” its worth over the last few months.

In a televised address, Prime Minister Geir Haarde said, “There is a very real danger, fellow citizens, that the Icelandic economy in the worst case could be sucked with the banks into the whirlpool and the result could be national bankruptcy.”

The country’s bank debts — most of which are related to foreign investments — are more than eight times the national gross domestic product.

Two of the nation’s banks have been ordered to sell overseas investments, while the nation’s third biggest bank, Glitnir, was bailed out by the government to save it from collapse.

Iceland’s clampdown on foreign banking may be problematic for U.K.-based businesses that are supported by Icelandic loans.

Iceland’s government hopes their rescue plan will bring funds invested overseas back to the home country.

–Julia Hengst/Newsdesk.org

Source:

“Financial crisis: Iceland’s ordered to start selling foreign-owned assets”
The Telegraph (U.K.), October 6, 2008

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