Iceland finalised loans totalling about $10bn on Thursday, roughly the size of its entire GDP, to prevent its economy collapsing. The move underlined the damage wrought by last month’s disintegration of the country’s banking system. Iceland finally secured a $5.1bn bail-out for its crisis-stricken economy, comprising $2.1bn from the IMF and additional loans of up to $3bn from Denmark, Finland, Norway, Sweden, Russia, Poland and the Faroe Islands. It also agreed to borrow £2.2bn from the UK and €1.3bn from the Netherlands government which will be used to compensate depositors in Icesave, the online arm of Landsbanki, the collapsed bank. The loans will expose 320,000 Icelanders to a brutal recession, soaring inflation and an enormous debt burden that will haunt them for years in the form of taxes, threatening to trigger mass emigration. Up to a third of Icelanders say they want to flee the island. Indeed, says Lex, as the world deleverages, “expect to find an Icelander, if not a Russian, near you”.
