The ripples from the US subprime collapse continue to rock Europe as a group of German banks agreed to bail out troubled IKB Deutsche Industriebank, reeling from additional risk from US bond investments. Meanwhile, four Norwegian municipalities scrambled to recover after they they invested $156 million in now fading US municipal bonds, the Wall Street Journal reports.
Despite an August bailout, IKB said it could face a liquidity shortfall. State-owned development bank KFW, which owns 38% of IKB, said market developments led to “a dramatic worsening” of the situation. The Norwegian towns, meanwhile, face compounding losses because they used borrowed money to buy the securities from a broker heading into bankruptcy.