Wounded Iceland takes over top bank, seeks Russia loan
REYKJAVIK (Reuters) - Iceland took over its second largest bank, propped up a battered currency and sought on Tuesday a 4 billion euro ($5.44 billion) loan from Russia to help tackle a crisis threatening to overwhelm the island nation.
Russian Finance Minister Alexei Kudrin said Moscow viewed positively the request from Iceland, whose premier said it had faced a risk of "national bankruptcy."
"The result will be announced after negotiations," Kudrin said.
Prime Minister Geir Haarde said Icelandic officials would travel to Moscow on Tuesday or Wednesday to discuss terms for the loan to bolster the country's foreign reserves.
"With this, like everything else, nothing is certain until it's certain," Haarde told a news conference.
He said Iceland would not default on its sovereign debt.
Home to just 300,000 people, Iceland used emergency powers rushed through on Monday to dismiss the board of directors of Landsbanki LAIS.IC and put the bank in receivership.
That tipped the country's crown currency into a 35 percent nosedive although it later recovered some ground.
So volatile was the currency that Iceland's central bank was forced to introduce a currency peg at a value of 131 per euro. It was last trading around 150.
An International Monetary Fund spokesman said an IMF staff team was in Iceland and Norway said it was ready to discuss help but had heard nothing from Reykjavik.
Its reluctance to ask for IMF help was also noted when G7 deputy finance ministers discussed its situation during a conference call on Monday evening, according to a government official from one of the Group of Seven industrial nations.
"Japan proposed using an IMF facility to help Iceland, but Iceland did not want to ask the IMF for money," the official, who was familiar with the content of the phone consultations, told Reuters, speaking on condition of anonymity.
"Iceland does not want to be singled out as a country that needs IMF help. Even last summer, Iceland preferred to ask the central banks of some Nordic countries for help rather than go to the IMF for money."
REPERCUSSIONS
Iceland's commerce and banking minister Bjorgvin Sigurdsson said Landsbanki would be open and run as normal while changes were taking place. Iceland's Financial Supervisory Authority (IFSA) had replaced the bank's board with its own people. Continued...
