In These New Times

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Iceland facing Bankruptcy halts trading

Posted by smeddum on October 10, 2008

Iceland halts stock trading
From Chicago Tribune news services
October 10, 2008

Iceland suspended trading on its stock exchange for two days and took control of the country’s largest bank—the third to be placed under its protective umbrella—on Thursday as it grappled with a banking crisis that is threatening to engulf the country.

The government also used sweeping emergency powers to create a new bank that will take over the bulk of the domestic operations of another one of its collapsed banks.

The country is struggling to get a grip on the collapse of its banking system, a situation that Prime Minister Geir Haarde has warned is putting Iceland at risk of “national bankruptcy.”

A stock market boom in the mid-1990s supported the rapid growth of Iceland’s banking sector, which came to dwarf the rest of the economy. The strategy gave Iceland one of the world’s highest per-capita incomes, but when liquidity markets dried up around the world, the banks struggled to refinance those heavy debts.

Some experts painted a dire picture of its prospects.

“The economy may well contract more than 10 percent between now and the end of this crisis,” said Lars Christensen, chief analyst at Danske Bank A/S in Copenhagen. “Inflation will jump to at least 50 percent to 75 percent in the coming months.”


The Dutch government said it has set up a $27.4 billion fund to support financial institutions in the Netherlands during the ongoing credit crisis.

Finance Minister Wouter Bos said the move was not targeting any specific bank or insurer and said the money would be available to any “essentially healthy” company that requests it.

After the nationalization of the Dutch operations of Fortis NV and ABN Amro earlier this month, the only remaining large Dutch financial companies with stock market listings are bank and insurer ING Groep NV and insurer Aegon NV.

Bos said the fund’s establishment marked a change in tactics from reacting to the crisis to proactively heading off troubles.


The global credit crisis is starting to restrict the ability of Canadians to obtain loans for mortgages, cars and investments, Canada’s finance minister said.

Finance Minister Jim Flaherty said he is looking to increase liquidity in the market but declined to release details.

In an indication of the uncertainty in the markets, Canada’s private banks declined to pass on to consumers the full half-percentage-point cut in interest rates announced by central banks around the world. The banks cut interest a quarter of a point instead.


Premier Silvio Berlusconi said his government’s pledge to aid Italy’s banks if needed was designed to ensure that the bank system can continue normal operations, not because of worries that any deposits would be lost. Under an emergency measure, the government would step in to back deposits up to the current insured level of $140,900, if necessary.


Trading on the Jakarta Stock Exchange was canceled Thursday after the JSX index sank 10.4 percent a day earlier before trading was suspended. Indonesia’s president urged state companies Thursday to buy up their own shares to quell a stampede of selling that sent the main stock index skidding more than 20 percent this week.

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