The Icelandic krona was down a staggering 17 per cent against the Euro earlier today.
Russia, though, rode to the rescue, giving the struggling Nordic economy a €4bn loan, nearly doubling the central bank’s dwindling currency reserves:
The Russian Ambassador to Iceland, Victor I. Tatarintsev, informed the Chairman of the Board of Governors of the Central Bank of Iceland this morning that Russia would grant the Central Bank a loan in the amount of 4 billion euros. The maturity is three to four years on terms in a range of 30 to 50 basis over libor. Prime Minister Putin has confirmed this decision.
The Icelandic Prime Minister initiated contacts concerning this agreement some months ago. Representatives from the Central Bank of Iceland and the Government will finalise the agreement in Moscow.
This loan significantly bolsters the foreign exchange reserves of the Central Bank of Iceland and thus underpins the stability of the exchange rate of the króna.
The krona is already recovering.
Meanwhile, in the banking sector, Landsbanki has already reportedly been put into receivership, though Kaupthing has been extended a €500m loan from the central bank.
Update 10:41 BST: Húrra, not so much. From Reuters:
MOSCOW, Oct 7 (Reuters) - Russia has not made any decision on lending money to Iceland, deputy finance minister Dmitry Pankin told Reuters on Tuesday after Iceland’s central bank said Moscow had agreed to provide it with a 4 billion euro loan. “No decision has been made on providing Iceland with a loan,” Pankin, whose remit includes foreign debt, told Reuters.
