Iceland forced to seek captial injection from Russia
Icelandic Prime Minister Geir Haarde said yesterday that the country’s “friends” had not offered financial assistance to his country, forcing it to seek a capital injection from Russia.
Iceland earlier revealed that Russia had agreed to provide the country with a €4 billion loan as the crisis-hit country set about shoring up its foreign exchange reserves, although Russia’s Deputy Finance Minister, Dmitry Pankin, later said no agreement had been reached.
Iceland’s currency, the krona, rallied on the news wiping out losses made on Monday and earlier yesterday.
“We have throughout this year asked many of our friends for swap agreements and for other forms of support in these extraordinary circumstances,” Haarde said.
“We have not received the kind of support that we were requesting from our friends. So in a situation like that one has to look for new friends.”
Iceland’s Central Bank said its Russian counterpart had provided €4 billion on a four-year deal, with interest set at 30-50 basis points over the London interbank offered rate.
The move followed discussions with other countries in the past few days and emergency legislation passed in Iceland on Monday night that allowed the nationalisation of banks.
