International investors service Moody’s downgraded the Icelandic state’s credit rating by several categories yesterday, including a rating evaluating the government’s financial strength to support the country’s banking system in times of crisis.
“It means that the state or the Central Bank will face considerable difficulties while coming to the assistance of the banks,” Gunnar Haraldsson, director of the University of Iceland’s Institute of Economics, told Morgunbladid.
“I don’t think people should be too concerned about this,” said Minister of Finance Árni M. Mathiesen, emphasizing that the government has declared that deposits in Icelandic króna are safe.
The credit rating which estimates the government’s strength to support the banks, also estimates its capability to secure domestic deposits. That rating dropped by four categories, from Aaa to A1.
“Such a significant downgrading is disappointing considering that the government, in cooperation with the International Monetary Fund, has decided to handle all areas of the economic situation in an ordered manner,” said Ólafur Ísleifsson, economics professor at Reykjavík University.
Prime Minister Geir H. Haarde said it is naturally not good news that Moody’s has lowered the credit rating for the Icelandic state. “We will do what we can to restore the credit rating and further strengthen it.”
“The economic measures that we are currently undertaking, including floating the króna, is of course a part of that,” Haarde added.