Iceland threatened by credit crunch

REYKJAVIK, Iceland, April 1 (UPI) -- The international financial crisis has spread to one of Europe's smallest countries, threatening the banks of Iceland.

The Icelandic central bank raised interest rates to 15 percent last week because the drying up of international investment threatened the value of the krona, USA Today reported.

"There is a crisis everywhere," said Hjordis Vilhjalmsdottir, an economist with the commercial bank Glitnir. "We are facing it maybe more than some other countries."

Iceland, 600 miles west of Norway, 180 miles east of Greenland and just south of the Arctic Circle, has a population of only 313,000. While its economy is still largely dependent on fishing, it has one of the highest standards of living in the world.

In the past five years, Icelandic banks had grown their assets to eight times the country's gross domestic product, a record for the world, The Daily Telegraph reported.