By Ray Furlong
BBC News, Reykjavik
Iceland has announced part of a plan to hammer out a financial package to shore up its troubled banking sector.
The country's largest banks have now agreed to sell off some of their foreign assets and bring them home.
The deal, announced by Geir Haarde, Iceland's prime minister, came after a day of frantic talks with political, financial and Bank uncertainty hits UK shares ...
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The government will now try to persuade the trade union pension funds to repatriate some of their funds too.
After marathon talks at his lakeside residence in Reykjavik, Mr Haarde announced part of a deal late on Sunday.
He said it had been agreed that Iceland's banks had grown too big and now needed to sell off part of their overseas assets.
This money will be brought back into Iceland, in an effort to shore up the economy and prevent the currency, the krona, from sliding any further. Last week, it lost a fifth of its value against the dollar.
Banking troubles
The government also wants the trade unions to return a sizeable portion of their foreign-invested pension funds to Iceland.
To help stabilise Iceland's troubled economy, the unions are also being urged to agree to wage restraint, despite the country's inflation rate of 14%.
But in return, the unions want Iceland to apply for EU membership - a move it has resisted for decades.
Iceland's economy was traditionally based on fishing, but in the 1990s the banks boomed, expanding abroad and growing to several times the size of the national GDP.
The government stepped in to nationalise Iceland's third largest bank, Glitnir, last week.
The nationalisation led ratings agencies to downgrade Iceland's credit rating.
Analysts have warned the troubled banking sector may be too big for Iceland to be able to save.
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(BBC)
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