7th Jun 2023

Iceland turns to Russia to avoid bankruptcy

  • Iceland's traditional "friends" decided not to help (Photo: Johannes Jansson/

The Icelandic government, fighting hard to prevent a collapse of its financial system, took control of the country's second biggest bank, Landsbanki, on Tuesday (7 October) and has had to run to Russia for cash to support its currency.

The country's central bank has also pegged the krona to the euro.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Reykvjavik said it had had no choice but to turn to Russia to secure a €4 billion loan lasting for up to four years - something necessary to strengthen its foreign exchange reserves and support the krona.

"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," Prime Minister Geir Haarde was cited as saying by the Financial Times on Tuesday.

"In a situation like this, it's turning out that it's every man for himself, every country for itself, everybody's taking care of their best interest and that's what we are doing," he added, stopping short of revealing which countries refused to assist in the rescue operation.

Moscow has confirmed it is assessing Iceland's application and views the request "positively."

"Iceland is well known as a country with tough budgetary discipline and a high rating of reliability," Russian finance minister Alexei Kudrin said, the Financial Times reports.

The volatility of the country's currency, the krona, was so extreme that Iceland's central bank had to peg the currency to the euro at a rate of 131 krona per euro.

A spokesperson for the International Monetary Fund said that a staff team from the IMF was in Reykjavik.

Iceland has been pummelled by the ongoing financial crisis, with the prime minister earlier saying his country risks facing "national bankruptcy".

"What we are doing here is saving the domestic banking system and making sure that it can function properly," he was cited as saying by the BBC, referring to the rescue plan of Landsbanki.

The institution owns British internet bank Icesave, home to some 350,000 savers in the UK and Netherlands. Its UK operation announced yesterday it had stopped customers from withdrawing or depositing money.

In separate moves, the country's central bank injected a loan of €500 million to the largest bank Kaupthing "to facilitate operations." The government has also stepped in to nationalise the third-largest bank, Glitnir, to avert its bankruptcy.

ECB: eurozone home prices could see 'disorderly' fall

The European Central Bank in its Financial Stability Review warned EU home prices could see a 'disorderly' fall as high mortgage rates are making houses unaffordable for households and unattractive for investors.

Adapting to Southern Europe's 'new normal' — from droughts to floods

Extreme weather events in recent months have worsened agricultural production in southern Europe, prompting concerns for authorities in Portugal, Spain, France and Italy. As countries will likely face dryer conditions, experts urge adaptation measures for the 'new normal'.

PFAS 'forever chemicals' cost society €16 trillion a year

Researchers found that global societal costs of the so-called forever chemicals or PFAS amount to €16 trillion per year. Meanwhile, the bigger producers of these chemicals are also among the ones spending the most to lobby EU policies.


Final steps for EU's due diligence on supply chains law

Final negotiations on the EU due diligence law begin this week. But will this law make companies embed due diligence requirements in their internal processes or incentive them to outsource their obligations to third parties?

Latest News

  1. EU Commission wants better focus on mental health care
  2. Right of Reply from the Hungarian government
  3. True scale of horror in today's Belarus hard to comprehend
  4. Israeli settlers encircling Jerusalem, EU envoys warn
  5. No clear 'Qatargate effect' — but only half voters aware of EU election
  6. Part of EU middle class 'being squeezed out', MEP warns
  7. Migration commissioner: Greek pushback film 'clear deportation'
  8. In 2024, Europe's voters need to pick a better crop of MEPs

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us