Iceland's banks are facing a battle for survival, after the country's government introduced emergency legislation to give the government sweeping new powers over its collapsing financial sector, dpa reported.
Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country's banking sector to the global financial turmoil is raising the spectre of "national bankruptcy."
Iceland is paying for a recent economic boom that has seen its newly affluent companies go on an acquisition spree across Europe and its banking sector grow to dwarf the rest of the economy. Bank assets are nine times annual gross domestic product.
The banking sector's heavy exposure to the global credit squeeze has caused the currency to plummet, soaring inflation and falling imports.