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Iceland At Risk Of A 'junk' Credit Rating

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Finance minister Steingrimur Sigfusson acknowledged that the ratings agencies, including Fitch, Moody's and Standard & Poor's, are reviewing their classifications.

"We're obviously concerned, and people in the finance ministry and central bank are meeting with rating companies, not only Fitch, and discussing these things," Mr Sigfusson said. "Certain steps are being taken to monitor the situation that will have an effect on the eventual outcome of the rating."

Iceland's credit rating is already in a vulnerable position after its three biggest banks and currency collapsed late last year. The International Monetary Fund was forced to put together an emergency loan package of $10bn (£6bn) to avoid a default.

Fitch and Standard & Poor's already rate Iceland's debt as BBB- – one grade above junk. Moody's ranks it as Baa1, three notches above non-investment grade.

The government is currently struggling to pass hefty budget cuts through parliament, as Johanna Sigurdardottir, the new prime minister, is under pressure to deal with a deficit of 170bn ISK (£800m) by 2013.

There has also been widespread anger among Icelandic MPs about the terms of its agreement with the UK to repay a £3.3bn loan at a costly interest rate of 5pc.

The British Treasury stepped in to compensate customers of the collapsed Icelandic bank, Icesave, but the tiny Nordic nation has agreed to pay back every depositor up to €22,000 (£18,500).

Once more the rating agencies are ahead of the curve. :rolleyes:

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Guest Parry
You mean it isn't junk already. What else could possibly deteriorate further?

Ze fisch!

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