Snappy newsletters. Simple Facebook sharing. Spirited comments. Sweet features are waiting… GET THEM NOW!

Could the Credit Crunch Sink a Whole Country?

Iceland frets about collapse as interest rates spike to 15%

By Jason Farago,  Newser Staff

Posted Mar 26, 2008 9:10 AM CDT
Email

(Newser) – The global credit crisis has spelled disaster for banks and hedge funds, but now worry is mounting that an entire country could go under. Yesterday the central bank of Iceland was forced to raise its interest rate 1.25 percentage points to 15% at an emergency meeting, reports the Financial Times. The surprise move was a desperate effort to curb runaway inflation and prop up the krona, a currency in free fall.

"We are a small open economy and we are obviously affected by moves in the international economy," Iceland's central bank governor said. Yesterday's rate cut saw the krona jump, but if confidence in the financial system continues to wane, the country's banks could suffer a run and spell serious trouble for the tiny Nordic nation. One analyst chose his words carefully, saying, "Let’s say Iceland is not in more danger than some Wall Street banks."

Reykjavík, the capital of Iceland. Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.
Reykjavík, the capital of Iceland. Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.   ((c) Bob Jagendorf)
Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.
Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.   ((c) karynsig)
A 100 krónur bill. Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.
A 100 krónur bill. Iceland's central bank was forced to raise interest rates to 15% yesterday at an emergency meeting.   ((c) James Cridland)
« Prev« Prev | Next »Next » Slideshow
To report an error on this story, notify our editors.
A snapshot of the day's best news stories.
 
COMMENTS
Be the first to comment on this story.

Editorial: the Icelandic saga
Financial Times (UK)

Blogger worries about the country's impending doom
Director of Finance

World • Money

 
inflation • Iceland • credit crisis • interest rate cut • krona • financial crisis

More Newser Stories

How Iceland Went From Codfish to Meltdown

Russia Drops $5.4B on Iceland's Imploding Economy

Fed 'Will Get on Top of This,' Says Bernanke Mentor

Fed Cuts Rate to 0%-0.25%

Youths Flee Struggling Iceland
NEWS FROM OUR PARTNERS
Other Sites We Like:   24/7 Wall St.   |   Betty Confidential   |   BuzzFeed   |   Cracked   |   Fark   |   Timelines   |   The Frisky   |   Geek Sugar   |   NewsOne