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Russia unveils package to help Iceland
Russia negotiated an emergency bailout for Iceland and unveiled an aid package for its own banks yesterday, while Japan called for greater coordination in tackling the global financial crisis.
- Reuters
- Published: 23:26 October 7, 2008
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Reykjavik/London: Russia negotiated an emergency bailout for Iceland and unveiled an aid package for its own banks yesterday, while Japan called for greater coordination in tackling the global financial crisis.
The International Monetary Fund increased its estimate of global losses from the financial meltdown to $1.4 trillion (Dh5.14 trillion) and warned that the world's economic downturn was deepening.
"The financial planet is in total crisis," European Central Bank Governing Council member Guy Quaden said, capturing a mood of disarray in governments and markets alike.
Around the globe, people are worried about safeguarding savings and keeping their jobs as some of the pillars of international finance give way.
Australia reacted to the crisis by cutting interest rates by 100 basis points to 6.0 per cent, putting pressure on Western central banks to lower the cost of borrowing.
Japanese Prime Minister Taro Aso said he hoped the Group of Seven nations would send a firm message on stabilising markets when it meets later this week in Washington.
"The impact would be substantial if the G7 didn't send a clear message. European leaders have met, but it didn't go well, and European financial markets have fluctuated rapidly and substantially, so I'm worried about the impact on Japan," Aso told reporters.
Leaders of Europe's G7 countries met in Paris last Saturday. European Union finance ministers said yesterday they would take all necessary measures to protect the banking system and savers.
The upheaval that began on Wall Street has effectively shut down interbank and other loan markets. Stemming from the collapse in the US housing market and increase in bad loans, the crisis is the worst financial storm in 80 years.
Home to 300,000 people in the North Atlantic, Iceland has said it faces the threat of national bank-ruptcy after a rapid expansion in international financial services in recent years. Using emergency powers adopted on Monday, Iceland dismissed the board of Landsbanki, putting its second largest bank into receivership.
Iceland also propped up its battered currency and said it planned to send a delegation to Russia to agree a 4 billion euro ($5.44 billion) loan to help it through the storm.
Russian President Dmitry Medvedev announced an extra 950 billion roubles ($36.4 billion) of new credit for banks at an emergency Kremlin meeting after Russian stocks suffered their worst pounding ever the previous day.
Medvedev said that most of the money, which is offered over five years, would be channelled through the biggest two state-controlled banks, Sberbank and VTB.
Britain will hold more talks with banks this week over a possible multi-billion pound injection of public funds, industry sources said as the credit crisis tightened its grip on Europe's main financial centre.
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