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发表于 16-10-2008 12:17 PM
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Iceland teeters on the brink of bankruptcy
By JANE WARDELL – Oct 7, 2008
REYKJAVIK, Iceland (AP) — This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.
Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.
The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.
"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.
The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.
"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.
A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.
One of Iceland's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers — including enough to make it the largest private company in Britain, where it owns a handful of stores such as the famous toy store Hamley's.
Kaupthing, Iceland's largest bank and one of those whose share trading was suspended last week to stop a huge sell-off, has also invested in European retail groups.
Thousands of Britons have accounts with Icesave, the online arm of Landsbanki that regulators said was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.
To try to wrest control of the spiraling situation, the government also loaned $680 million to Kaupthing to tide it over and said it was negotiating a $5.4 billion loan from Russia to shore up the nation's finances.
The speed of Iceland's downfall in the week since it announced it was nationalizing Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.
Famous for its cod fishing industry, geysers, moonscape and the Blue Lagoon, Iceland was the site of the Cold War showdown in which Bobby Fischer of the United States defeated Boris Spassky of the Soviet Union in 1972 for the world chess championship. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents deemed the most contented in the world.
No more.
Despite sunny skies Tuesday after three days of unseasonably cold weather, Reykjavik's mood remained grim — cafes were half-empty, real estate agents sat idle, and retailers reported few sales.
"I'm really starting to get worried now. Everything is bad news. I don't know what's happening," said retiree Helga Jonsdottir as she headed to a supermarket.
Icelanders are also beginning to question how a relative few were able to generate the disproportionate wealth — and associated debt — that Haarde has warned puts the entire country at risk of bankruptcy.
Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.
Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.
Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system. Among the purchases were the iconic Hamley's toy store and the West Ham soccer team.
Back home, the average family's wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.
But the whole system was built on a shaky foundation of foreign debt.
The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.
Those external liabilities mean the private sector has had great difficulty financing its debts, such as the more than $5.25 billion racked up by Kaupthing in five years to help fund British deals.
Iceland is unique "because the sheer size of its financial sector puts it in a vulnerable situation, and its currency has always been seen as a high risk and high yield," said Venla Sipila, a senior economist at Global Insight in London.
The krona is suffering in part from a withdrawal by a falloff in what are called carry trades — where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.
After watching the free-fall for several days, the Central Bank of Iceland stepped in Tuesday to fix the exchange rate of the currency at 175 — a level equal to 131 krona against the euro.
Haarde said he believed the measures had renewed confidence in the system. He also was critical of the lack of an Europe-wide response to the crisis, saying Iceland had been forced to adopt an "every-country-for-itself" mentality.
He acknowledged 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 resources.
As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."
Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.
"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."
http://ap.google.com/article/ALe ... Vvn_OE9vKwD93LRO8O1
Iceland plunges further into financial turmoil
By JANE WARDELL – Oct 8, 2008
REYKJAVIK, Iceland (AP) — Iceland plunged further into financial turmoil — and muddled into a diplomatic spat with Britain over its handling of the crisis — on Wednesday as the country's third-largest bank went into receivership and the government abandoned attempts to put a floor under its free-falling currency.
As increasingly worried Icelanders attended a protest concert in the capital's main square and reported problems withdrawing and transferring money from banks, their government was scrambling to get a hold on the spiraling situation.
Prime Minister Geir H. Haarde acknowledged that it will take the tiny Nordic nation of just 320,000 people several years to recover from the crisis, which has been wrought by the exposure of the country's top-heavy banking sector to the global credit squeeze.
"What we have learnt from this whole exercise is that it is not wise for a small country to try to take a leading role in international banking," Haarde told reporters. "We are too small to sustain a banking system that has become too big."
A stock market boom in the mid-1990s supported the rapid growth of the country's banking sector, which now dwarfs the rest of the economy with assets at nine times annual gross domestic product of $19 billion.
In urgent moves to downsize that overgrown sector, Iceland on Wednesday said it had put Glitnir into receivership under the Icelandic Supervisory Authority. The regulator immediately began to restructure the bank, saying it would sell its Finnish and Swedish businesses.
That decision was a sign that problems at Glitnir were larger than the government thought when it announced less than two weeks ago that it would nationalize the bank — the switch into receivership gives Glitnir temporary protection from its debt obligations.
But a similar move with the country's second-largest bank, Landsbanki, which went into receivership on Tuesday, started a diplomatic incident over the standing of accounts held by Swedish and British customers of the bank's Online arm, IceSave.
After British Prime Minister Gordon Brown said he would pursue legal action to recover the lost deposits of some 300,000 Britons who hold accounts with IceSave, Haarde said that discussions had begun between the two countries to find a "mutually satisfactory solution."
"The government of Iceland is determined not to let the current financial crisis overshadow the long standing friendship between Iceland and the United Kingdom," Haarde said as he attempted to salve the situation.
Haarde said that Iceland was also in talks with representatives from the International Monetary Fund who were visiting Reykjavik on a previously scheduled trip, but had not decided whether to formally seek funding from the international body.
He added that talks with Russia over the potential of a 4 million-euro ($5.47 million) loan were scheduled to take place in Moscow next Tuesday.
Until then, some support came from Sweden, where the central bank said Wednesday it would grant liquidity assistance to the Swedish arm of Kaupthing, the country's largest bank, with a loan of up to 5 billion crowns ($702 million).
Meanwhile, the Icelandic central bank, Sedlabanki, said it was giving up attempts to peg its currency to stop the krona free-falling.
The bank had temporarily fixed the exchange rate of the krona at a level equal to 131 krona against the euro — on Tuesday morning — but a plea to the market to support its attempts to strengthen the currency went unheeded and it abandoned the fix Wednesday.
Speculation is also building that Sedlabanki will cut interest rates from the current record high of 15.5 percent after the coordinated cuts by the U.S. Federal Reserve, the European Central Bank and a host of European and Asian countries on Wednesday. Haarde declined to comment Wednesday on whether an Icelandic rate cut was imminent.
The speed of Iceland's downfall has caught many by surprise, despite warnings the country was the "canary in the coal mine" of the global credit squeeze.
The intervention of the British and Swedish authorities underscores the effect that a full-blown collapse of Iceland's financial system would have on the rest of Europe, where Icelandic banks and companies have invested heavily in businesses from the famous toy store Hamley's to English football club West Ham.
Kaupthing alone has racked up debts of more than $5.25 billion in five years to help fund British deals.
Back in Reykjavik, Haarde attempted to reassure average Icelanders that they would not pay the price for the lending practices of the country's leading banks.
Following reports that many locals could not access banking accounts, Haarde said that regulators were working to untangle what he termed "technical problems," and that they expected the banking system to be fully operational by Thursday.
"We must stick together through this crisis, help each other with the kind of optimistic and daring which are the characteristics of the people who live here," he said, noting the country still has strong fundamentals in its fishing, tourism and renewable resource industries.
http://ap.google.com/article/ALe ... Vvn_OE9vKwD93MGN180
PM: British to blame for Iceland bank collapse
By Olafur Olafsson on Oct 11, 2008
During a meeting with the Icelandic Independence party this morning, PM Geir H. Haarde didn’t mince words about the British authorities. According to him, the British authorities had brought Iceland’s largest bank to its knees with their abuse of power this last week and that Iceland must look seriously into the possibility of litigation, MBL reported.
Haarde said that a government should naturally defend the rights of its subjects, but the statements of the British had been quite unwarranted.
“I won’t try to hide my surprise and disappointment when it became clear that the British government enforced the laws on defence against terrorism against Icelandic companies in the UK. Laws that were indeed very controversial when they were passed because of the inherent possibility of being abused in alternative situations, not involving terrorism at all. Perhaps we have now witnessed how that controversy was warranted.”
“These measures, along with the statements of the British PM, with whom I have by the way had very friendly relations, coupled with his statements about the defaulting and possible national bankruptcy of Iceland, can in fact be interpreted as an assault against the interests of the Icelandic nation, bearing in mind the difference in size and power between these two nations,” said Haarde.
He added that despite the fact that the British government had acted on the assumption of right against the Icelandic government over collateral and settlement of some bank accounts, the initiative of the British ministers had been completely out of proportion with the issues.
“We neither can, nor will (Icelanders), accept being cast as terrorists by the British government. When I asked the British Minister of Finance, in our conversation if they were serious about the title they were giving us, he denied it. But acting in this fashion against a smaller nation of friends in times of trouble is neither proper nor ethical,” said Haarde.
He continued that following clear and unambiguous Icelandic complaints, the British authorities had backed somewhat away from their position and that there were efforts towards normalising relations between the countries.
“However the fact remains that the British authorities may have caused immense damage with their brutish behaviour. Among other things, they may have brought down Iceland’s largest company with their abuse of power this week. We must look in all seriousness into the possibility of litigation because of these deeds,” said PM Haarde.
http://www.icenews.is/index.php/ ... eir-abuse-of-power/
Iceland meltdown hits ordinary people
The Associated Press
Published: October 13, 2008
REYKJAVIK, Iceland: Until recently, 25-year-old Audur Elin Sigurdardottir was living a modest Icelandic dream — renting an apartment and two cars with her boyfriend on their one full-time and one part-time salary.
"Now I live at home with my Mom, I work three jobs and it's still not enough to pay my debts," said Sigurdardottir as she digested the island's daily onslaught of bad news over a calming glass of wine with a friend.
Iceland's financial meltdown isn't just a banking calamity — it is also destroying dreams and turning lives upside down across this once affluent nation.
Just last year, Iceland won the U.N.'s "best country to live in" poll, with its residents rated the most contented in the world. The stock market was booming, cash-rich companies helmed by youthful CEOs were on an acquisition spree across Europe, and Icelanders enjoyed one of the globe's highest per capita incomes.
No more. The global financial crisis has washed up hard on the shores of this volcanic island of 320,000 people, its decision to swap cod fishing for a complex debt laden economy exacting a heavy toll.
For ordinary Icelanders, the biggest problem is that they were encouraged to upgrade to a more luxurious lifestyle by buying houses and cars that were financed by 100 percent loans based on a spread of foreign currencies.
The loans, called "Myntkörfulán" or "breadbasket" loans, were immensely popular because of their low interest rates compared to loans based on the then strong krona. But thousands of people are now defaulting as the Icelandic currency plummets.
Classified advertisements are mushrooming in the local newspapers with car owners offering cash of up to 770,000 krona (US$6,300) to anyone willing to take their car off their hands and assume responsibility for their "bread basket" loan.
Kolbeinn Blandon, who owns the Hofdahollin car dealership on the outskirts of the capital, says foreign loans "are killing us."
Blandon usually sells up to 150 cars a month. This month he's sold just eight so far and his staff chat idly as they take a long smoking break without a customer in sight.
"People are buying much cheaper cars, the expensive lot is just standing collecting dust, it is not selling at all," he says.
Blandon is now planning to export the cars back to Europe, where the price he can get from the strong euro will hopefully outweigh transportation costs.
When the country deregulated its financial industry in the mid-1990s and created the Icelandic stock exchange, the subsequent boom in paper wealth funded a generation of entrepreneurs who set out to conquer swaths of the European economy.
Back home, Icelanders eagerly took their share of the boom, with the average Icelandic family seeing its wealth surge by 45 percent in just five years.
Now, seemingly overnight, most of that wealth has evaporated.
"I am really afraid of what's going to happen," said Alexandra Sif Herleifsdottir, a 19-year-old bar worker. "We are afraid we might lose our jobs."
Her friend Sigurdardottir said she has cut back spending, with a drink after work one of her last remaining luxuries.
Icelanders are also increasingly angry, looking for somewhere to point blame for the country's spectacular fall.
Olafur Sigurdsson, 21, a school worker, is furious at both the banking executives who have retreated behind closed doors and the government, which has been making daily — but incoherent — TV appearances to explain the crisis.
"These people are going on TV and we can see in their faces that they are powerless," he said glumly.
In a jibe at the government, Elisabet Jokulsdottir carried a sign at a protest rally outside the central bank offices in Reykjavik: "Stay calm while we rob you."
"My son lost all his savings just days after they told us it would be fine," she said. "Somebody has to take responsibility."
Along with despair and anger, many Icelanders are displaying stoic resolve typical of the country.
"We can learn from what they did wrong," said Alvin Zogu, a 21-year-old print machinist, of the bankers who caused the financial collapse. "We can make better decisions."
That optimism is likely misplaced in the near term: it will take the Icelandic economy years, if not decades, to rise from the ashes.
Soaring inflation and crippling interest rates have been compounded by a banking system collapse of epic proportions that Prime Minister Geir H. Haarde has acknowledged will take the tiny Nordic nation years to recover from.
In the past week, the government has used emergency powers to take control of the country's three major banks, trading on the stock exchange has been suspended and attempts to put a floor under the free-falling krona have failed dismally.
Supplies of foreign currencies have dried up and, as Britain invoked anti-terrorism laws to freeze assets of Icelandic banks, the nation has never felt more isolated.
"There's a feeling in the air I've never felt before," said 21-year-old Olaf Helgason. "It's almost like 9/11 again. It feels like we are going through something that only happens once in a lifetime."
____
AP reporter Valur Gunnarson in Reykjavik contributed to this report.
http://www.iht.com/articles/ap/2 ... ed-Lives.php?page=2
[ 本帖最后由 Mr.Business 于 16-10-2008 12:21 PM 编辑 ] |
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