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Wednesday, October 8, 2008

Iceland on the verge of Bankruptcy during this WORLD ECONOMIC CRISIS

Iceland stands on the brink of becoming the first "national bankruptcy" of the global financial crisis.

The nation's 320,000 people have seen their currency lose nearly half of its value and banks are collapsing under the heavy debt.

Icelandic banks have made heavy investments across Europe in everything from fashion retailers to top Soccer teams. A collapse of its financial system would send shock waves through the region.

The government has nationalized two banks and loaned 680 million dollars to another and it is negotiating a 5.4 billion dollar loan from Russia to stabilize its own finances.

Iceland is struggling against an economic crisis. ”We can go bankrupt,” confesses the Icelandic prime minister.

Geir Haarde admits that the global economic crisis can lead to Iceland’s economic collapse. That saga island has during the last two weeks bought up huge parts of crisis-stricken Icelandic banks, which together have a loan portfolio ten times the total Icelandic national product.

Risky to salvage more

He warns that their present situation can lead to the whold of the Icelandic bank sector becoming inoperable, and that the government will no longer be in a postion to bail the sector out.

”It is too risky for the Icelandic nation to give a lifeline to the banks in this way. There is therefore a real threat of the Icelandic economy being ruined, together with the banks,” says the prime minister, according to the Danish website.

All Icelandic banks were put on the observation list on Monday morning, and all trade in the bank shares was thereafter suspended.

National bankruptcy

According to the prime minister, there have been hectic meetings on the island over recent days, where it has been discussed whether the country had any possibility at all of avoiding bankruptcy.

”There is a real danger that the Icelandic economy, in a worst-case scenario, could meet with ruin together with the banks, and bring about a national bankruptcy,” said Haarde in a speech to the Icelandic population,” according to Dow Jones Newswires.

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