Iceland seizes bank, seeks Russia’s aid

From combined dispatches

REYKJAVIK, Iceland Iceland took over its second-largest bank and sought a $5.44 billion loan from Russia on Tuesday to help tackle a crisis that threatens to make the small island nation the first “national bankruptcy” of the global financial meltdown.

Russian Finance Minister Alexei Kudrin said Moscow looked positively on the request from Iceland, whose prime minister said it faced the risk of financial collapse.

Prime Minister Geir Haarde said Icelandic officials would travel to Moscow to discuss terms for the loan to bolster the country’s foreign reserves.

“With this, like everything else, nothing is certain until it’s certain,” Mr. Haarde told a news conference.

Even with the ruble near an 18-month low and the stock market suffering its worst rout since the 1998 default, Russia has weathered the global credit crunch with $563 billion in currency reserves, the world’s third-largest amount.

That financial muscle is giving Prime Minister Vladimir Putin a weapon to challenge the U.S., which is grappling with its worst financial crisis since the Great Depression.

Iceland’s financial woes lapped across the North Atlantic Tuesday all the way to the headquarters of the European Union.

But the 27-nation bloc, based in Brussels, hasn’t taken sweeping joint action to deal with the global financial meltdown.

Instead, it’s essentially left member countries to go it alone with a patchwork of measures aimed at keeping banks afloat.

Frustrated investors want to know why, and some have begun to question whether the European Union - at its core, an economic union - will survive.

Although the European Union pledged to act as one to calm roiled markets, it hasn’t done much beyond a move Tuesday to boost guarantees on savings accounts.

That’s led member states to take an a la carte approach, with major economic powerhouses such as Britain and Germany putting together rescue packages, leaving smaller nations like Iceland to take the fall.

It’s a risky business for the European Union. In the short term, banks in poorer countries may founder and fail. And by relinquishing key decisions to its members just as they’re turning to EU headquarters for guidance at a time of crisis, the bloc could see decades of attempts to forge unity simply disintegrate.

Failure to pull together on the financial crisis could push member nations even further apart, perhaps emboldening a resurgent Russia’s influence on the fringes of the enlarged European Union.

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