Things have gotten pretty serious in the tiny nation of Iceland:
REYKJAVIK, Iceland Oct. 9 — The government of Iceland on Thursday seized control of the country’s largest bank — the third bank takeover this week — and suspended trading on the stock market, as the North Atlantic island nation grapples with an unprecedented financial meltdown that has made it the first national casualty of the global economic crisis.
The takeover today of Kaupthing bank now leaves the government in control of Iceland’s three major banks, following the seizure earlier this week of Landsbanki, the second largest, and Glitnir, the third biggest bank. The government said domestic depositors would have their money guaranteed, and said bank operations, including ATM machines, would continue to operate normally.
But there was nothing normal about this fiscal crisis,which in a few days has wiped out much of the wealth that had been accumulating here for the last decade.
Iceland’s recently privatized banks had invested heavily overseas, turning this remote country into a financial powerhouse known as the “Nordic Tiger.” But the three banks’ overall indebtedness was more than ten times the gross domestic product of Iceland itself, and their growth and reach over the last ten years had far outstripped the ability of this small country’s central bank to back them up.
When global credit markets tightened, it threatened to bankrupt the entire country.
“The Nordic Tiger is not a tiger anymore,” said economics professor Oddgier Ottesen, with Reykjavik University. “It’s a kitten.”
The government, desperate for cash, will hold talks next Tuesday with Russia about a possible $5.4 billion loan, and the prime minister said help from the International Monetary Fund was “definitely an option.”
Is this a sign of further problems to come ?
the scariest part of this post was the two words “with russia”. as has been said before a million times, when we lose our financial strength, we lose our global position.