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McDonald's pulls out of Iceland

LONDON - McDonald's is to withdraw from Iceland after the country's economic problems forced it to decide between raising prices 20% to become profitable or retreating from the island.

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Iceland will join Armenia, Bosnia and Herzegovina and Albania in the list of countries where the 'golden arches' has no presence.

McDonald's has said it is closing its three restaurants in the country and has no plans to return.

The fast food retailer said its decision was principally motivated by a collapse in Iceland's currency and the operational costs involved in running such a small chain. The Icelandic krona has lost almost 80% of its value against the euro.

It is estimated McDonald's would need to increase prices by around 20% to make the business profitable. This would mean the price of a Big Mac rising well above the CHF5.85 (£3.51) the popular meal costs in Switzerland, currently the most expensive country to buy the burger in.

In previous years this would not have been a problem. Until the recession, Iceland was one of the world’s wealthiest counties per capita with an economy principally based on banking and fishing. 

Iceland's proximity to the Arctic Circle meant McDonald's had to import all of its ingredients from Germany.

Meanwhile the economic problems in the UK have caused the restaurant no such problems as recession hit UK consumers turn to fast food. Last week McDonald's announced a 12% increase in sales for the three months preceding September 30.

The UK figures compare favourably with McDonald's global sales growth of 3.8%.

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