Economic and financial restructuring in Iceland

- reaction to recent downgrading by international ratings companies, by Mr. Árni M. Mathiesen, Finance Minister of Iceland.

In recent days and weeks, all three of the international ratings companies, Fitch, Moody’s and Standard & Poor’s have downgraded the foreign and local currency ratings of the Government of Iceland.
The decisions by these rating agencies are based on the events following the collapse of the three major banks in Iceland, and are therefore not unexpected. However, it is worth mentioning that much of the risk was correlated with the size of these banks and the fact that so much of their assets and operations was in other countries.

As we are moving towards stabilization and recovery, the government has put in place several initiatives and measures to help households and businesses during this economic crisis. Reconstruction of the banking system is progressing with cooperation of major international financial institutions and consulting firms. Further action and reform is needed and will be introduced in due time.

We have already experienced a welcome development in the appreciation of the value of the Krona, in the past few days. Most likely, this development is linked to a turnaround in trade, with a significant trade surplus in the past three months and a sharp current account reversal.

It should be emphasized that the Icelandic authorities have a clear objective in restoring market confidence, and our goal is that Iceland will again have a place among nations that receive the highest marks possible by international rating institutes within four or five years.

We are putting all our efforts, in collaboration with the IMF, the international banking community and the hard working people of Iceland, to reach that goal.

• Further information on the restructuring of the Icelandic banking sector