Sweden to participate in joint Nordic loan to Iceland

Sweden has joined with Denmark, Finland, and Norway to provide a joint loan to troubled Iceland worth $2.5 billion to help the troubled Nordic country cope with its acute economic crisis.

In a joint statement issued on Thursday, the finance ministers from the four Nordic countries said the loan would complement a $2.1 billion credit for Iceland approved Wednesday by the International Monetary Fund.

“Within the framework of the IMF-supported programme, the Nordic countries — Denmark, Finland, Norway and Sweden — have worked closely together and jointly decided to supplement the IMF financing of $2.1 billion with additional loans of $2.5 billion,” the ministerial statement said.

“We have worked intensively with our Icelandic colleagues and our countries’ central banks to address the crisis in Iceland, building on the decision by our Prime Ministers to establish a Nordic joint task force on October 27,” the statement continued, adding that the creation of the task force was a key step in getting closer to a solution for Iceland’s economic problems.

The Icelandic economy, which is highly dependent on the country’s financial system, was knocked flat by the international credit crisis.

The three biggest banks were nationalized in early October, with the turmoil threatening to cost Iceland up to an estimated 85 percent of gross domestic product (GDP).

The Nordic ministers in their statement called attention to a commitment by Iceland to implement spending reforms.

“We stress that, as outlined in the IMF programme, an ambitious multi-year fiscal consolidation programme will help Iceland stabilize the economy, including the exchange rate, and reduce public debt over the medium-term.

“We understand that Iceland is fully committed to honouring its international obligations.”

Iceland has said it needs $5 billion to revive its economy and finances.