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Has the UK government just wasted £3 billion on Iceland rescue?

While the UK government took a major risk loaning £3 billion to Iceland after the debacle of the last few weeks it looks as though that money may be at risk with news that the country is still well short of the total funds needed to get the economy back on its feet. This was announced just after they country had agreed a rescue loan of £1.3 billion from the International Monetary Fund (IMF), so where does that leave the UK?



There are real fears this evening that the total funding required to refloat the Icelandic economy may not be forthcoming as quickly as it is required. If this is the case there may be further risk to funds already sent to assist with the rescue, which could include the UK's £3 billion contribution.



On the surface it is difficult to see how Iceland has managed to get itself into this mess but underneath it looks as though it has been a time bomb waiting to go off. For years the country has punched above its weight and now we know why. The explosion in property and business investments has taken off over the last few years and now the banks have been caught over extended with no liquidity and falling asset bases.


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