Iceland PM backs bank chief, upbeat on crown

By Patrick Lannin

REYKJAVIK (Reuters) - Iceland's prime minister said on Tuesday he had full confidence in the country's central bank chief, despite criticism that not enough was done to prevent the crisis in the island nation's banking system.

Critics have said Central Bank Governor David Oddsson, a former long-serving prime minister, did not do enough to stave off the crisis and that his communications had at times exacerbated problems.

"I have full confidence in him," Prime Minister Geir Haarde told Reuters when asked whether Oddsson should go.

"This is not the time to assess blame for what happened, this is the time to find solutions."

But not long after Haarde's comments, a top minister joined the ranks of those calling for change at the central bank.

Foreign Affairs Minister Ingibjorg Solrun Gisladottir, in an interview with state radio, said it was necessary to have "a change at the top of the central bank" so that the prime minister had necessary room for maneuver.

Haarde said the country, whose banks expanded aggressively into foreign markets, borrowing heavily to fund themselves and to provide credit to clients, had to a certain also been a victim of the global financial crisis.

Iceland's economy has been plunged into crisis after the government took over management of top banks Glitnir, Kaupthing and Landsbanki.

Currency trading has all but ceased, with Haarde earlier telling reporters only one local bank, Landsbanki, was trading the crown.

Despite the huge problems facing the country, Haarde was upbeat about the crown. The central bank last week abandoned a brief attempt to defend a peg at 131 to the euro.

"I don't think it will much lower. I think it is undervalued right now and when we get the market in a normal position again the crown will appreciate in value," he said.

The government and administrators of the three banks were also working hard on sorting out their future.

"There is going to be a restructuring, that is what we are working on right now," he said. "That is a task that is being worked on day and night."

He did not know how long sorting out the chaos would take.

"I can't give you the exact answer to that, hopefully not very long."