Belgium offers Iceland lifeline

Brussels - Belgium offered a lifeline to Iceland's biggest bank on Wednesday and said its prime minister would visit Reykjavik on Friday to see how he could help in the North Atlantic country's acute financial crisis.

Belgian Finance Minister Didier Reynders told reporters that his government, which has had to bail out two Belgian-based banks, was ready to help rescue Kaupthing Bank, where thousands of Belgians kept savings and now feared for them.

"We are trying to see how we can help through an intervention of the IMF," Reynders told reporters on arrival at a European Union summit. "We are absolutely ready to guarantee the continuity of the bank so that all the creditors keep 100% of their savings."

He said Belgian Prime Minister Yves Leterme would visit Iceland on Friday to meet his counterpart, Geir Haarde.

Belgian news agency Belga reported earlier that Belgium and Luxembourg were jointly trying to find a solution to help Belgian depositors in Kaupthing Bank.

"Our aim is to make sure that Belgian victims of the Icelandic bank can get their savings back," Leterme's spokesperson Peter Poulussen told Belga.

Kaupthing Bank operates in Nordic countries as well as seven other European countries including Luxembourg and Belgium.

Belgian depositors in Kaupthing demonstrated in Brussels on Wednesday, Belga said.

Kaupthing, the largest bank in Iceland, was taken over last week by the Icelandic government.

Icelandic banks in recent years embarked on a campaign of unbridled expansion, building up operations overseas but taking on huge debts. When global credit markets froze, the banks found themselves unable to meet obligations.

Iceland moved to shore up its ravaged economy by slashing borrowing costs on Wednesday and officials pursued efforts to get help from Russia in tackling the worst financial crisis in the island's history.

The central bank cut its main interest rate to 12 percent from 15.5%, hours before Prime Minister Geir Haarde was due to address parliament on how the government is coping with a crisis that has brought down the banking system and made the local currency untradeable.

A team from Iceland met Russian officials in Moscow on Wednesday for a second day of talks on a possible multi-billion-euro loan.

Iceland is also due to present a plan to the International Monetary Fund (IMF) in the coming days and is widely expected to seek funds.

- Reuters