Subprime crisis sends chill through Arctic Circle

OSLO, Jan 29, 2008 (AFP) – Perhaps the most unlikely victims of the US subprime crisis are eight small Norwegian towns currently licking their wounds after seeing tens of millions of dollars in risky investments go up in smoke. A soaring number of defaults on US subprime mortgages, or loans made to people with poor credit histories, has caused global market turmoil.

Few people in the eight provincial Norwegian towns, several clustered around the Arctic Circle, thought they would be paying such a steep price however, or that their local public services would be cut to help foot the bill.

The whole mess started when the towns, none counting more than 33,000 inhabitants, grew impatient with making just modest investment profits at a time when the world economy was booming.

Hoping to make huge gains, the towns of Narvik, Rana, Hattfjelldal, Hemnes, Vik, Bremanger, Kvinesdal and Haugesund began investing in high-risk securities linked to the US mortgage market which were created by Citigroup.

The value of the investments first soared but soon crumbled as the bottom fell out of the US subprime housing market, while a clause in the agreement forced the towns to keep pumping in more money, pushing some of them to the