26th Jun 2019

Iceland secures cash from Norway and Denmark

  • Icelandic officials have started talks in Moscow over a much bigger €4 billion loan to help the country’s financial sector. (Photo: wikipedia)

Iceland, at the epicentre of the past week's financial earthquake, has turned to its Nordic neighbours for help to obtain foreign currency.

The Icelandic central bank on Tuesday (14 October) said it had made use of currency swap agreements with the central banks of Denmark and Norway, withdrawing €200m from each under a deal negotiated in May.

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Shares on the Icelandic Stock Exchange lost 76 per cent of its value upon opening on Tuesday after trading was stopped last week.

Icelandic officials also on Tuesday began talks in Moscow over a much bigger €4 billion loan to help the country's financial sector.

"We had an excellent reception," Sigurdur Sturla Palsson, head of the Icelandic delegation to Moscow was quoted saying in the Scandinavian press.

The talks are scheduled to end on Thursday.

Iceland's prime minister, Geir H. Haarde, said at a news conference in Reykjavik on Tuesday: "The size of the Russian loan, if there is a loan, which is not definite, has not been decided."

A loan on the scale of €4 billion would be worth about one per cent of Russia's gold and foreign exchange reserves, according to the Times.

Observers have questioned Moscow's motives for helping Iceland, which is a member of NATO.

"It would be much more natural, if credits came from for example Norwegian oil funds, than from Russian ones" former Danish foreign minister Uffe Ellemann-Jensen commented in his blog in Danish daily Berlingske Tidende.

"Icelanders work harder than most people … but also have a desire for independence, which isolated them when they needed solidarity from an economic and political community. Imagine if Iceland had been in the EU and in the euro, when markets froze."

The Bank of England announced earlier this week that it is lending €128 million (£100m) to its Icelandic counterparts in order to save British depositors' money.

Iceland is also in discussions with the International Monetary Fund for assistance.

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