12th Apr 2024

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

Get the EU news that really matters

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.

Resist backlash on deforestation law, green groups tell EU

European environmental groups have urged the EU Commission to stand firm on implementing the bloc's landmark anti-deforestation legislation — despite a backlash from governments in South America, Africa and some EU ministers.


'A race to the bottom': How the CAP green ambitions unravelled

The EU's easing of green agricultural policy conditions as a response to farmers' protests has sparked controversy. Critics fear that short-term quick fixes are not a solution for the sector, while others cite a CAP-Green Deal gap.


This 'deregulation' lobbying now threatens EU economy

Next week's EU summit (17-18 April) will discuss the strategic agenda for the next five years. The current "competitiveness agenda" is to a large extent driven by a big lobbying campaign — so far, not well covered by the media.

Latest News

  1. UK-EU deal on Gibraltar only 'weeks away'
  2. Belgium declares war on MEPs who took Russian 'cash'
  3. Brussels Dispatches: Foreign interference in the spotlight
  4. Calling time on Amazon's monopolism and exploitation
  5. Resist backlash on deforestation law, green groups tell EU
  6. China's high-quality development brings opportunities to the world
  7. Ukraine tops aid list again, but EU spending slumps
  8. Who did Russia pay? MEPs urge spies to give names

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us