Iceland and the bank crisis

Of all the European states, Iceland is suffering most from the effects of the current bank crisis. Among other reasons this is because Iceland's major financial institutions acquired shares using borrowed capital and have been hit hard by the loans crisis. Björn Sundell warns that this could spell trouble for all the Nordic countries: "The question is what will happen if Iceland's bank system, with all its associated institutions in other northern countries, hits turbulence or even collapses. Over the past few months we have watched central banks all over the world adopt joint measures to mitigate the impact of the turbulence on the credit market. A country in crisis deserves the help of others. If Iceland is forced to take action against speculators, as Prime Minister Geir Haarde has intimated, it will urgently require assistance. But this assistance shouldn't result in the risks that Icelanders have taken being transferred to other Nordic countries."

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