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Leader says Iceland needs $6 bln to recover

Leader says Iceland needs $6 bln to recover

Icelandic Prime Minister Geir Haarde said Tuesday his country needs about $6 billion in loans to recover from the financial meltdown, just as the country's central bank separately hiked its interest rates by a massive 6 percentage points.
Haarde told The Associated Press that Iceland _ whose banking sector collapsed under the weight of the credit crunch in October _ will need $4 billion in addition to the $2 billion loan package announced by the International Monetary Fund.
"It's not a precise number, it's not a scientific number but we are looking in that neighborhood," Haarde said. "We are talking about 6 (billion dollars) altogether."
Haarde would not say how much of the additional loans he hoped to receive from the other Nordic countries _ Sweden, Finland, Norway and Denmark.
"I don't want to mention the figures because I do not want to put pressure on them," Haarde said, on the sidelines of a Nordic Council meeting in Finland.
The comments came just as Iceland's central bank announced it hiked its interest rates by a stunning 6 percentage points to help the currency. That is a remarkable policy U-turn after it slashed its interest rates by 3.5 percentage points just two weeks ago.
After the financial sector fell apart, bringing the currency down with it, the government and central bank have been trying to protect the wider economy from the fallout.
Last week, Iceland reached a tentative agreement with the IMF for a $2 billion loan over two years. Haarde said he came to Helsinki to seek more assistance.
The prime ministers of the other Nordic countries pledged to help the small North Atlantic island nation, but stopped short of announcing an aid package. Instead, they appointed a committee to study Iceland's woes before making any decision.
"We will wait to see how the IMF package is finalized before making any decisions," Swedish Prime Minister Fredrik Reinfeldt said.
Iceland has already called on a swap facility, drawing euro200 million ($256 million) each from the Norwegian and Danish central banks, but has not used the total of euro500 ($636 million) from each. A similar deal with Sweden's central bank has also been offered.
The country's central bank is facing considerable losses after the bankruptcy of the three main banks _ Glitnir, Landsbanki and Kaupthing.
The banks' foreign debts amount to over $60 billion, dwarfing the country's gross domestic product of $14 billion.
Danish Prime Minister Anders Fogh Rasmussen said his government was willing to help more but that all decisions would have to be made by Denmark's central bank.
"Of course, we want to be of assistance to our Icelandic friends, but the central bank is a free agent and independent of the government," Fogh Rasmussen said. "They will make the decisions, not the government."
The prime ministers' comments came during three days of meetings between Nordic government ministers and lawmakers in conjunction with the 60th session of the Nordic Council, which promotes governmental and parliamentary ties between the five countries.


Updated : 2021-06-25 21:29 GMT+08:00