Haarde authorised the emergency loan

The decision to grant Kaupthing Bank 500 million euro emergency loan in the autumn of 2008 just before the bank collapsed along with the two other major banks of Iceland was eventually taken by the government of the then Prime Minister Geir H. Haarde.

This was revealed in an editorial of the Icelandic daily Morgunblaðið today written by its co-editor Davíð Oddsson who was chairman of the board of governors of the Central Bank of Iceland at the time. The government hoped the loan would help Kaupthing Bank overcome its difficulties but the bank nevertheless collapsed within few days. The loan formed most of Iceland's foreign currency reserves and was granted with a collateral in the Danish bank FIH.

The question of who took the decision to grant the emergency loan has been a matter of regular political debates in Iceland since the collapse of Kaupthing Bank. That debate surfaced yet again last week when former directors of the bank received jail sentences from Iceland's Supreme Court for market manipulation which occurred only couple of weeks before the loan was granted.

According to the sentence the offences were intended to convince the market and others that the bank was in better shape than it really was.

Politicians have regularly demanded that a recorded phone call between Haarde and Oddsson regarding the decision to grant the emergency loan should be made public but Haarde has refused to give his permission for that. The governors of the Central Bank did not want to take that decision according to the editorial in Morgunblaðið which is why the phone call took place.