Credit crisis threatens Iceland

REYKJAVIK, Iceland, Oct. 3 (UPI) -- Iceland has been hit hard by the credit crisis, with the government taking control of the country's third largest bank this week.

The country's currency has been sliding, The Guardian reported. The kronur dropped 14 percent during the week and is now worth less than a cent.

Gylfi Magnusson, a University of Iceland economist, said that the entire banking system is at risk. Because the three major banks, Kaupthing, Landsbanki and Glitnir, have assets about nine times the country's gross domestic product, the country "doesn't have the money to keep the banks afloat," he added.

"This past week has been about as bad as it could get," he said. "People are very worried and have no real idea what the future might look like."

Iceland, with a population of about 300,000, has been one of the fastest-growing European economies in recent years. But the growth has been built on easy credit, and its banks are now having trouble obtaining short-term loans.