Chris Cantell Discusses Financials: Iceland on the edge of collapse by Martina Janeckova

Iceland is on the verge of becoming the first “national bankruptcy” of the global financial crisis. Although it is a small country, Iceland has impressive international reach because of an outsized banking sector investing hugely over the European continent. One of Iceland’s biggest companies, retailing investment group Baugur, owns or has stakes in many European retailing companies including the famous toy store Hamley’s. But now the Iceland’s financial system is collapsing and the country’s top four banks hold foreign liabilities of more than $100 billion. Government has already nationalized the Landsbanki bank under the emergency laws enacted to deal with the crisis. The share trading of Kaupthing, Iceland’s largest bank was suspended last week. The national currency, krona, is falling and on Tuesday Oct. 7 the Central Bank of Iceland fixed the exchange rate of the currency at a level equal to 131 krona against the euro. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents considered to be the most contented in the world. Now the café’s are half-empty, real estate agents have nothing to do and retailers report few sales. Retiree Helga Jonsdottir said “I’m really starting to get worried now. Everything is bad news. I don’t know what’s happening.” Prime Minister Geir H. Haarde criticized the lack of Europe-wide response to the crisis, saying Iceland had been forced to adopt an “every-country-for-itself” mentality. He admitted that Iceland’s financial reputation was likely to suffer from both the crisis and the response despite strong fundamentals such as the fishing industry and clean and renewable energy sources. He added that the banks had been “victims of external circumstances.”

by Martina Janeckova for PocketNews (http://pocketnews.tv)

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edited by Beata Biskova