Viking Solidarity...

The IMF has approved a $2.1 billion credit for Iceland. This marks the first time since 1976 that a western European country has drawn from the Fund (last to do so was...the UK). The agreement unlocks Iceland's access to an additional $2.5 billion from Norway, Sweden, Denmark, and Finland . Additional money could come from Russia and Poland. None of the Scandinavians would support Iceland until the IMF signed off on the deal.

Iceland reached agreement in principle with the IMF in late October; Great Britain (and perhaps the Dutch as well) apparently refused to support the agreement at the IMF Executive Board until the Icelandic government agreed to guarantee the deposits that British residents had made in Icesave, an Icelandic internet bank that disappeared when the government nationalized its parent, Landsbanki.

The government finally agreed to guarantee these deposits on Sunday. "It was made clear to us that the IMF package and the $3.9 billion of loans from other countries would not be forthcoming unless we cleared the Icesave dispute," said Urdur Gunnarsdottir, a spokeswoman for Iceland's foreign ministry.

This would seem to be yet another instance in which governments use the IMF to protect the interests of private creditors at home (rather than the financial position of the borrowing country). This may be the first time, though, that the private creditors are individual depositors rather than large financial institutions.