Russia Drops $5.4B on Iceland's Imploding Economy

Nordic nation pegs exchange rates, nationalizes another bank
By Jason Farago,  Newser Staff
Posted Oct 7, 2008 7:51 AM CDT
Reykjavik, the capital of Iceland. The Nordic nation faces a full-blown economic disaster as its oversized banking sector continues to crumble.   (©lmrush)
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(Newser) – Iceland is in talks to receive a $5.43 billion loan from Russia to stave off economic collapse, as the tiny Nordic country nationalized yet another bank and fixed its currency's to the euro. An oversized banking system has left Iceland dangerously exposed to market gyrations, and the prime minister yesterday warned that the country was on the verge of default.

"There is a very real danger," said PM Geir Haarde, "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 nationalization of Landsbanki, a bank with branches worldwide, drove the krona down further still; it has lost 31% of its value against the dollar in the past month.