Iceland raises rates to 18.0-pct after currency collapse

REYKJAVIK, October 28, 2008 (AFP) – Iceland jacked up its key interest rate to 18 percent and announced a request for help from the European Central Bank and the US Federal Reserve in twin moves on Tuesday to stave off national bankruptcy.

“Iceland’s central bank sent a request to the ECB, the Fed and the Nordic banks on Friday,” Icelandic Prime Minister Geir Haarde told reporters in Helsinki where Nordic leaders were meeting.

Haarde said Iceland had not yet received replies to its request.

Iceland’s once booming financial sector has collapsed under the weight of the worldwide credit crunch, forcing the government to take control of the major banks as its currency has nosedived.

Reykjavik agreed with the International Monetary Fund last week on a loan of 2.1 billion dollars (1.6 billion euros) but Haarde had said the country would need about four billion dollars more.

Iceland is hoping for “a round figure in terms of four billion dollars of loans over four to five years,” he said Tuesday.

The country has so far approached the four Nordic central banks in Denmark, Finland, Norway and Sweden, the ECB and the Federal Reserve.

Iceland’s central bank said on Tuesday it had raised its key interest rate by 6.0