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Iceland set for $2.1bn IMF help | Iceland set for $2.1bn IMF help |
(3 days later) | |
The International Monetary Fund (IMF) has reached a "tentative" agreement to give aid to Iceland worth about $2.1bn (£1.3bn; 1.58bn euros). | The International Monetary Fund (IMF) has reached a "tentative" agreement to give aid to Iceland worth about $2.1bn (£1.3bn; 1.58bn euros). |
It is the first Western country to have approached the IMF for aid since 1976. | It is the first Western country to have approached the IMF for aid since 1976. |
Iceland said it should have immediate access to $833m if the "comprehensive stabilisation programme" is approved. | Iceland said it should have immediate access to $833m if the "comprehensive stabilisation programme" is approved. |
Its financial system is close to collapse after the country was forced to take over three of its biggest, debt-laden banks this month. | Its financial system is close to collapse after the country was forced to take over three of its biggest, debt-laden banks this month. |
The Nordic nation's troubles have had severe repercussions elsewhere in Europe. In the UK, individual savers and local councils have been unable to access funds deposited in Icelandic banks. | The Nordic nation's troubles have had severe repercussions elsewhere in Europe. In the UK, individual savers and local councils have been unable to access funds deposited in Icelandic banks. |
The overarching goal is to support Iceland's efforts to adjust to the economic crisis in a more orderly and less painful way Dominique Strauss-KahnIMF managing director Icelandic anger at UK terror move Governments fight economic onslaught | The overarching goal is to support Iceland's efforts to adjust to the economic crisis in a more orderly and less painful way Dominique Strauss-KahnIMF managing director Icelandic anger at UK terror move Governments fight economic onslaught |
Iceland's currency, the krona, has almost halved in value this year and banking transactions with other countries have almost completely frozen. | Iceland's currency, the krona, has almost halved in value this year and banking transactions with other countries have almost completely frozen. |
Less pain | Less pain |
The IMF said the tentative agreement aimed to "restore confidence" in the nation's banking system, but warned that the country's economy could contract by as much as 10% next year. | The IMF said the tentative agreement aimed to "restore confidence" in the nation's banking system, but warned that the country's economy could contract by as much as 10% next year. |
IMF managing director Dominique Strauss-Kahn said that Iceland had put together "an ambitious economic programme" to restore confidence in its banking system, stabilise its currency. | |
This meant it deserved IMF funding as well as the support of the international community. | This meant it deserved IMF funding as well as the support of the international community. |
"The overarching goal is to support Iceland's efforts to adjust to the economic crisis in a more orderly and less painful way," Mr Strauss-Kahn said. | "The overarching goal is to support Iceland's efforts to adjust to the economic crisis in a more orderly and less painful way," Mr Strauss-Kahn said. |
Sustainable plan | Sustainable plan |
Iceland said the IMF funds would be used to stabilise its currency, reintroduce a flexible interest rate regime and to overhaul its financial regulation system, especially insolvency laws. | Iceland said the IMF funds would be used to stabilise its currency, reintroduce a flexible interest rate regime and to overhaul its financial regulation system, especially insolvency laws. |
Iceland's Prime Minister Geir Haarde said he did not think the IMF had laid out any unacceptable conditions. | Iceland's Prime Minister Geir Haarde said he did not think the IMF had laid out any unacceptable conditions. |
"This program will enable us to secure funding and gain access to the necessary technical expertise required to stabilise the Icelandic krona and to provide support for the development of a healthier financial system," Mr Haarde said. | "This program will enable us to secure funding and gain access to the necessary technical expertise required to stabilise the Icelandic krona and to provide support for the development of a healthier financial system," Mr Haarde said. |
"As a result, Iceland will commit to a sustainable long-term economic policy, and a plan for the recovery of the Icelandic economy," he added. | "As a result, Iceland will commit to a sustainable long-term economic policy, and a plan for the recovery of the Icelandic economy," he added. |
Mr Haarde said that it was vital that the Icelandic public did not get lumbered with the debts which banks had built up when they were privately owned. | Mr Haarde said that it was vital that the Icelandic public did not get lumbered with the debts which banks had built up when they were privately owned. |
Before going to the IMF, it had been in talks with Russia for a $4bn loan, but discussions broke down. | Before going to the IMF, it had been in talks with Russia for a $4bn loan, but discussions broke down. |
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