IMF, European States Plan Massive Loan for Iceland | Business| Economy and finance news from a German perspective | DW | 07.11.2008
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IMF, European States Plan Massive Loan for Iceland

Iceland is to receive a $6 billion (5 billion euro) loan from the IMF and a collection of European countries in a bid to prevent the island-state from going bankrupt, Poland’s finance ministry said Friday, Nov. 7.

A man walks out of a branch of Landsbanki in Reykjavik, Iceland

Iceland nationalized banks as financial turmoil spread

Britain, the Netherlands, Poland and the Scandinavian states are all involved in preparing the loan, the ministry statement said.

"Poland has decided to join a consortium of countries that will offer financial support to Iceland," the statement said. “We foresee that the consortium will send to Iceland a total of $6 billion in aid."

Poland said its share accounted for $200 million and that the loan's terms would be set through talks between Iceland and the IMF.

Iceland rocked by financial crisis

IMF logo

The IMF has announced billions in aid to Iceland

Iceland was hit especially hard by the financial crisis and is teetering on the brink of bankruptcy. Reykjavik was forced to nationalize the country's three largest banks in October as the currency plummeted.

The country of little more than 300,000 inhabitants has already accepted a $2.1 billion loan from the IMF, but the global lender chose to delay the deal's announcement, scheduled for Wednesday, Nov. 5, for unexplained reasons.

The Nordic countries were Iceland's first port of call when it decided to seek a cash injection, but the European Central Bank and the US Federal Reserve were also approached.

Disputes continue

In an effort to protect British savings in the Icesave branch of the nationalized Icelandic bank Landsbanki, Britain froze the institution's assets and threatened legal action. An Icelandic lawmaker said Thursday the dispute could mar support by some European countries for the IMF loan.

The lawmaker added that the injection of the cash could be made conditional on the settling of the quarrel between his country and Britain.

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