EU leaders urged international help for crisis-hit Iceland

2008-10-16 15:05:46
BRUSSELS, Oct 16 (Reuters) - European Union leaders urged international help for crisis-hit Iceland on Thursday, but warned Reykjavik must respect its international commitments.
'The European Council expresses its solidarity with the efforts made by Iceland ... which requires the support of the international community,' a statement approved by leaders at the final session of a two-day summit said.
The crisis stemming from huge debts taken on by Iceland's main lenders has brought down the banking system and made the local currency virtually untradeable.
The EU leaders 'expect from Iceland that it respects its international commitments,' the statement said.
A diplomatic row broke out between Iceland and Britain, where thousands of account holders have been unable to withdraw their money.
As well as having to worry about foreign creditors, Icelandic banks have billions of dollars' worth of deposits in other countries that need to be repaid.
The governments of Belgium and Luxembourg will meet on Friday morning to discuss how they can help Iceland's main bank Kaupthing Bank and ensure that Belgian and Luxemburguese depositors do not lose their money, Belgian's prime minister Yves Leterme said on Thursday.
After that meeting Leterme will travel to Iceland on Friday to meet his counterpart, Geir Haarde.
'(It) is a problem for Iceland, a problem for Belgium and for Luxembourg, but ... first of all a problem for our citizens that gave their money, their savings to the Kaupthing bank,' Leterme told reporters.
'What kind of steps will be taken, we will discuss in the intercabinet discussion tomorrow,' he said.
The Belgian government is prepared to take a stake in to ensure that all Belgian savers at Iceland's biggest lender can get their money, Belgian Finance Minister Didier Reynders told financial daily De Tijd.
The government has already bailed out two Belgium-based banks -- Fortis and Dexia.
'The Belgian government is prepared to participate in a takeover of the bank. If that is the best way to give the depositors their money back, it is obvious that we think of that (option) in the first instance,' Reynders said in comments published on Thursday.
Reynders later told Reuters: 'The best solution is to go further with the bank, maybe with another partner.' He declined to confirm if that meant taking an equity stake.
Kaupthing Bank operates in Nordic countries as well as seven other European countries including Luxembourg and Belgium and was taken over by the Icelandic government last week.
Iceland was due to present a plan to the International Monetary Fund (IMF) in the coming days and is expected to seek funds. It was also looking at funding from oil-producing Russia.
Iceland's crisis is somewhat unique. The north Atlantic economy of some 300,000 people is highly developed and years of rapid growth have brought it unprecedented prosperity.
Icelandic banks in recent years embarked on a campaign of unbridled expansion, building up operations overseas but taking on huge debts. When global credit markets froze, the banks found themselves unable to meet obligations.
(Additional reporting by Antonia van de Velde; Editing by Paul Taylor) Keywords: FINANCIAL/EU ICELAND