Iceland remains the focus in Europe. Trading was suspended in banks, financial stocks and guaranteed bank deposits, joining Denmark, Ireland, Germany, Italy and Greece in doing so.
But banks heavily sold the citizens and businesses foreign currency loans at low interest rates in recent years (shades of our Swiss Loans Affair in the 1990s). The plunge in the kronor, the country's currency, has seen the size and cost of those loans balloon: the currency shed 20% last week alone after the bailout of the third largest bank, Glitnir.
The country has around $A180 million to cover billions of dollars of bank deposits (more than $A30 billion by some estimates). Many of those deposits are from people in other countries. These cross border deposits are a minefield and some may or may not be covered by the spreading regime of individual Government guarantees.
In a national speech overnight, the country's Prime Minister Geir Haarde warned that the country was threatened with "national bankruptcy'' from the credit crisis as he introduced emergency legislation to give the government sweeping new powers over the financial sector.
Iceland could be the first country to go broke in this crisis. It may need bailing out, not the banks which the Government and the authorities allowed to borrow short and lend domestically and internationally.