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Government bonds to save Iceland economy

Government bonds to save Iceland economy article image
Iceland's government yesterday revealed a new plan that will be instrumental in the country's economic recovery after its economy fell to pieces last year. The 1.5 billion-euro plan involves issuing bonds to recapitalise the three financial institutions that were reborn as public banks - Islandsbanki, New Kaupthing and New Landsbanki - following the collapse of the commercial banks. "Our agreements announced today are a major step forward in the re-establishment of a strong banking system," said Finance Minister Steingrimur Sigfusson in a statement. "Not only do today's announcements provide a firm basis for further progress, they also benefit customers of the new banks and the Icelandic economy in general." The government will retain shares in the institutions, but offer controlling stakes to the banks' former shareholders. Regulators will first need to approve the plan before stakes can be sold on August 14.

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