Iceland on the brink

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Last March, the blog noted an excellent article on Iceland by Gillian Tett of the Financial Times. She argued that Iceland was ‘the first country run like a hedge fund’. And she worried that its banks might prove not ‘too big to fail’, but ‘too big to rescue’? Now, it looks as though we are close to finding out the answer.

In 2007, according to Bloomberg, the assets belonging to Iceland’s 3 biggest banks were 9 times the country’s GDP. But on Monday, the government had to bail out the 3rd largest bank, Glitnir, to save it from bankruptcy. And now the Wall Street Journal reports growing doubt about the government’s ability to rescue any other large banks.

After months of denial, Iceland’s government has finally begun to face facts. On Thursday, the Prime Minister, Geir Haarde, warned that ‘Government, companies, households and people have seldom faced such great difficulties’. But it may already be too late, as there are suggestions that the country will soon require a rescue package from the International Monetary Fund.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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