Icelanders’ use of credit cards has reduced this Christmas, and people are paying with cash in larger numbers than they have in years. The banknotes in circulation increased to ISK 13 billion at the height of the crisis in October – an incredible figure for a country whose debit and credit card use is among the highest in the world. Read the full story

It may well be an oxymoron, but well-heeled ski bums have the chance to purchase their very own Swedish village and ski resort for the paltry price of USD 45.6 million. The village for sale is Storlien, a picturesque place in northern Sweden complete with its very own ski resort that features 24 runs, nine lifts, two hotels, and 2,900 hectares of land. Read the full story

“The meeting went very well and there was a really good atmosphere at Austurvollur (square),” Hordur Torfason, the singer/actor/songwriter who has been organizing the weekly protests in front of the Icelandic parliament, said to MBL.is.

When asked if he was happy with the turnout to today’s event, Torfason said that Austurvollur Read the full story

Visir.is thanks its readers for responding so well to their call for kreppa jokes. Kreppa is the Icelandic word for recession (and also the verb ‘to clench’, like a fist). Here we attempt to bring them to a non-Icelandic speaking audience! Read the full story

Three Nordic central banks have lent Iceland credit of up to 1.5 billion euros ($2.3 billion) to strengthen the country‘s foreign currency reserves, reports The New York Times.

The deal, which was announced by the central banks of Sweden, Denmark and Norway on Friday, saw the Icelandic krona (ISK) appreciate 4.5 percent, reversing a slide of as much as 26 percent this year.

The liquidity boost will give the Central Bank of Iceland access to as much as 500 million euros from each of the Nordic banks through currency swap agreements.

The funds will almost double the foreign exchange reserves held by the Icelandic Central Bank which had promised to support the country’s banks if they defaulted on their foreign loans.

“In times of uncertainty and turmoil, the central banks have a responsibility to cooperate,” Stefan Ingves, the governor of Sweden’s Riksbank, said in a statement.

The deal hopes to calm the financial markets in Iceland which have been uneasy since the beginning of the year when rumours of a banking crisis led speculators to bet against the country’s currency.

Analysts welcomed the agreement, saying it would provide Iceland with much-needed assistance in its efforts to steady its currency and its image in global markets.

“The chances are good that this will be a turning point for Iceland,” said Fridrik Mar Baldursson, a specialist in finance at Reykjavik University. “It should increase confidence in Iceland and make it easier for the government of Iceland to borrow money at a reasonable rate.”

Icelandic banks, often described as the likely trigger for a collapse, also appear to have improved their positions. The spreads on credit default swaps (CDS) have narrowed, indicating that investors are less worried about the possibility of the banks going bust. The credit default swaps for Icelandic banks decreased by 50 to 55 points when the Nordic Stock Exchange in Iceland opened on Friday morning.

The CEOs of Iceland’s three largest commercial banks Kaupthing Bank, Glitnir Bank and Landsbanki Bank were pleased with the measures taken by the Icelandic Central Bank and believe it will have a continued positive influence on the market.

Glitnir Bank was recently able to raise capital in Norway through a covered bond issue for NOK 7 billion (EUR 900m) and has held preliminary talks with international investors about taking a stake in the bank. Shares of all the major banks also rose on Friday.

“We’ve already seen a degree of turning in the situation,” said Richard Portes, an economist and expert on Iceland at the London Business School. “People are waking up to the fact that these are well-run banks.” He also said the amount of credit provided by the Nordic central banks could probably be increased if necessary.

“Fears of a meltdown are vastly overblown“, wrote Hannes Gissurarson, professor of political theory at the University Iceland in the Wall Street Journal yesterday.

International media coverage of Iceland has been in a frenzy following speculation that the tiny Nordic country is allegedly on the verge of economic collapse.

But the negative media publicity is unwarranted according to a number of senior bankers more familiar with the atypical workings of the Icelandic financial system.

“The global turmoil is certainly hurting the financial sector, but the danger of things toppling over here is greatly exaggerated,” said Finnur Oddsson, managing director of the Icelandic Chamber of Commerce.

Thor Herbertsson, co-author of an influential report in 2006 on Iceland’s economy with Fredric Mishkin, a member of the US Federal Reserve board, said “Iceland is not in more danger than some Wall Street banks.”

Richard Portes, President of the Centre for Economic Policy Research, urged investors to pay more attention to the data. Mr Gissurarson, who is also a member of the Central Bank of Iceland, presented some of this data to the Wall Street Journal yesterday.

“Iceland isn’t melting,” he said, and pointed to an improving current account deficit which dropped to 16% of GDP in 2007 from 25% the year before. Gissurarson said that Iceland has virtually no public debt and has enjoyed “unparalleled political stability” since the pro-business Independence Party took office in 1991.

He also addressed the issue of large private-sector debt which critics say is evidence of the impending doom. “To correctly assess the health of the economy, it’s not enough to look only at the future value of the investments financed by this debt but also at the new capital that has been created in Iceland over the last 16 years.”

Gissurarson said that this new capital, which has seen a surge in Icelandic investments overseas, (particularly in British and Nordic retail), has been part-funded by 5 billion dollars worth of fishing quotas and 6 billion dollars of newly-privatized public assets in Iceland. This is why Icelandic investors “have been able to play a far more important role in international finance markets than the small size of the economy might suggest”.

Gissurarson also highlighted that Iceland has per capita one of the strongest state pension systems in the world with assets of around $24 billion at the end of 2006 – $7 billion more than the country’s total annual GDP. Its two main exports, seafood and aluminium, also currently command record prices.

He concluded that there “is no mystery” to the recent appearance of Icelandic investors abroad, pointing to the rapid transformation of what was in essence a poor country before 1991, to a rich one with a privatised economy and “liquid capital” which can be used as collateral.

Meanwhile Icelandic central bank policy maker Ingimundur Fridriksson said yesterday the country’s banks are stable, having “virtually no subprime exposure”. Glitnir, one of the largest Icelandic banks with offices in 11 countries, said it was now the second largest equity broker on the Oslo Stock Exchange (OSE) after increasing its market share to NOK 24,127 million, or 7.37% of equity turnover, in March.

“Glitnir has a positive view on the development on OSE going forward. Most crises end with a collapse, and we believe the FED supported buyout of Bear Stearns will be remembered as the climax of the current credit crisis”, said Bengt Jonassen, Head of Research at Glitnir Securities.