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Iceland Flash

Yesterday (a national holiday in Iceland) Standard & Poor's revised its outlook for the Republic of Iceland to negative from stable. According to the rating service the revision reflects the growing possibility of a hard landing for the countries credit and investment boom as economic imbalances start to unwind. At the same time S&P affirmed its long term AA- foreign and AA+ local and its short term A-1+ foreign and local currency sovereign credit ratings on the republic.

S&P also revised the outlook for the Housing Financing Fund (HFF) from stable to negative and affirmed its AA- long- and A-1+ short term foreign currency credit ratings. The AA+ long-term and A-1+ short-term local currency ratings remain on CreditWatch negative, which is expected to resolve in 3Q 2006.

Source : Kaupthing Bank

In other recent news out of Iceland, June 5th saw Iceland’s Prime Minister Asgrimsson resign from his executive duties. This is following poor performance by his party in recent local elections and widespread reports of a split in his Progressive party. The foreign minister Mr. Harde, leader of the largest political party the Independence party assumes the role of Prime Minister until the next national election in 2007 (the government coalition consists of the Progressive party and the Independence party, who hold approx.

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