Iceland melting Icelandic expansion

A large current account deficit coupled with high inflation at a time when the housing bubble and consumer credit boom is about to come to a very abrupt standstill are all ingredients which we should be well aware of at this point. As can be expected this has also taken its toll on the financial sector which has played a seminal role in the recent Icelandic expansion. In this way, Iceland's three largest banks (Kaupting, Glitnir, and Landsbanki) have all seen their credit rating being scythed by the rating agencies recently. In one of their recent much appreciated daily digests Eurointelligence reports how credit default swaps have risen to alarming levels even if we should note that the three big Icelandic banks have branches in mainland Europe allowing them to potentially knock down the ECB's door for liquidity.

Posted in: Iceland