text:
Latest news on Icesave bill
Taken from Ice News, dated 8th January 2010
Government bill for a national referendum on Icesave legislation
By Olafur Olafsson on Jan 8, 2010 in Finance and Business, Iceland, Icelandic PM´s office, MBL, Politics
Iceland's coat of arms(Press release from Icelandic Prime Minister's office)
The Icelandic Parliament, Althingi, convened today to debate a Government bill regarding the preparation for a national referendum on the so-called Icesave legislation. This comes in the wake of the President of Iceland´s decision on 5 January not to sign into law a bill which provides for a state guarantee of loan repayments to the British and Dutch governments. According to Article 26 of the Constitution, a national referendum must take place should the President not sign a bill into law.
Prime Minister Johanna Sigurdardottir emphasized to Parliament the importance of respecting the Constitution, adding that all political parties agree that national referendum should take place as soon as possible.
"The draft law is simple and without restrictions. I am confident that the majority of eligible voters will make up their minds and participate in the referendum. I have full trust in the Icelandic voters and know that they will make the right decision. The government will prepare a vote and inform voters carefully, and by that bring the Icesave issue to a close. This is necessary to continue the ongoing economic recovery in Iceland", she stated during the parliamentary debate.
The draft law before Parliament states that a national referendum should take place no later than Saturday 6 March 2010. The government suggests that the vote should take place on 20 or 27 February, or 6 March, 2010.
Despite the President´s decision not to sign the bill it nevertheless enters into law and remains in force unless rejected in a national referendum.
The Icelandic Government has clearly stated its intention to honor its international obligations and remains fully committed to implementing the bilateral loan agreements with the UK and the Netherlands and thus the state guarantee provided for by the law. Iceland has been in close contact with the Governments of the UK and the Netherlands, other partner countries and the EU and the IMF, to inform counterparties about the latest developments and explain the process triggered by the decision announced by the President on Tuesday.
Reykjavik 8 January 2010
UK, Netherlands taxpayers will still get Icesave cash back
Some interesting comments after this news item..........
UK, Netherlands taxpayers will still get Icesave cash back after Iceland no vote
Posted on12 April 2011.
Despite some confused reports to the contrary, this weekend's Icesave referendum result does not mean Iceland will withhold refunds to the British and Dutch governments for the money they lost bailing out Icesave account holders in 2008.
Some international media sources have framed the referendum as a simple question of "should Iceland pay the Icesave money back or not?" In reality, the question was much more complicated and even after Icelandic citizens voted against the repayment contract, the British and Dutch governments will still receive very substantial refunds.
The Icesave accounts in the Netherlands and the UK were operated by Landsbanki, which was based in Iceland. Landsbanki paid into the Icelandic Depositors' Guarantee Fund in strict accordance with European law. However, no country's depositors' guarantee fund holds enough money to refund depositors after a total systemic banking crash of the magnitude which hit Iceland in autumn 2008. In the interest of domestic stability the British and Dutch governments therefore decided to refund Icesave savers directly when Landsbanki collapsed. They then sent the bill to Reykjavik.
Depositors are priority claimants on the bankrupt Landsbanki estate. This means that when Landsbanki's assets are sold, they are first-in-line to recover their losses. By bailing out Icesave customers, the British and Dutch governments replaced the savers and became priority claimants on their behalf.
What the Icesave referendum was about was essentially whether or not the Icelandic Depositors' Guarantee Fund should take a loan from Britain and the Netherlands in order to pay them back upfront (albeit with money borrowed from them) and therefore replace both governments as priority claimants on Landsbanki.
Icelandic voters decided on Saturday that it should not. This means that the British and Dutch governments remain priority claimants on Landsbanki.
Landsbanki now says it should be able to retrieve 90-100 percent of lost money for priority claimants over the next few years – including the British and Dutch governments. And furthermore, a third of that amount is due to be paid out this year. The Icesave referendum has no impact on the winding up of Landsbanki or to the payment amounts or time schedule. It only dictates to whom the money will be paid.
In the quite-likely event that the total Landsbanki winding up period returns all lost money to London and The Hague, the trilateral dispute would only be about interest payments during the time spent waiting for the money. The EFTA Surveillance Authority now awaits the response from the government of Iceland before deciding whether to start preparing a legal case against Iceland before the EFTA Court to establish whether or not the Icelandic taxpayer is legally responsible for the debts of Landsbanki – a private bank.
During the long negotiation process between the three countries and the three deals which were struck and then repealed (once by the British and Dutch governments and twice by Icelandic voters) the fundamental question of whether the taxpayer is ultimately responsible was never properly answered. As Minister of Finance Steingrimur J. Sigfusson told reporters this week: "Now it certainly will be".
Maybe the best theatre piece in years....
09/04/2010 | 11:00
Reading of Iceland Crisis Report at Reykjavík Theater
The long-awaited report on the causes of the October 2008 banking collapse by the Althingi parliament's investigation committee will be published on Monday.
09/04/2010 | 11:00
Reading of Iceland Crisis Report at Reykjavík Theater
The long-awaited report on the causes of the October 2008 banking collapse by the Althingi parliament's investigation committee will be published on Monday.
Inside the Althingi parliament. Copyright: Icelandic Photo Agency.
The employees of the Reykjavík City Theater have decided to read the report in its entirety—all 2,000 pages of it—on stage. Admission is free.
According to a statement on the theater's website, actors will not attempt to interpret the content of the report. The reading will begin as soon as the report is made public and will continue, day and night, until the report is finished.
Around 45 actors will participate in the reading, which is estimated to take three to five days. People are welcome to attend the reading in part or in whole. The theater will be open 24-hours a day and the reading will also be broadcast live on the theater's website.
The theater is hoping to become a sanctuary from the media circus, where the report is likely to be interpreted in a number of different ways, where people can come, listen and contemplate on the report's content without harassment from the outside world.
The theater is keen on being an active participant in discussions in society and cover topics important to the community. Since the banking collapse the theater has incorporated current affairs into its program in various ways, the statement reads.
Iceland to send response to EFTA Icesave reprimand
Iceland to send response to EFTA Icesave reprimand
Posted on01 May 2011.
A letter of response from the Icelandic state to the European Free Trade Association surveillance authority (ESA) about the Icesave dispute will be sent immediately after the weekend.
The letter is in its final editing stages at the Icelandic Ministry of Economic Affairs, RUV reports.
After the nation rejected the latest Icesave repayment deal with the British and Dutch in a referendum on 9th April, the Icesave issue has once again become a hot topic at the EFTA. It is likely that the ongoing dispute will be taken to the EFTA court.
Car Rental Services in Iceland
The ESA sent the Icelandic authorities a caution letter over the Icesave issue; as the organisation is of the opinion that Iceland is responsible for the debt. The official position of the Icelandic government following the referendum is that Iceland is not responsible.
The difference of opinion between Iceland and the EFTA was put on ice during Iceland's trilateral negotiations with the Netherlands and the UK — and also during the referendum. The letter must now be answered, however.
Minister of Economic Affairs, Arni Pall Arnason says that the official response has been worked on at the ministry over recent days and that the letter will be presented to the Althingi foreign affairs committee at 18.00 this evening. "Then we plan to send it off right away on Monday morning and will publicly state when that has been done," the minister said.
Read more: http://www.icenews.is/index.php/2011/05/01/iceland-to-send-response-to-e...
Maybe the best theatre piece in years....
09/04/2010 | 11:00
Reading of Iceland Crisis Report at Reykjavík Theater
The long-awaited report on the causes of the October 2008 banking collapse by the Althingi parliament's investigation committee will be published on Monday.
09/04/2010 | 11:00
Reading of Iceland Crisis Report at Reykjavík Theater
The long-awaited report on the causes of the October 2008 banking collapse by the Althingi parliament's investigation committee will be published on Monday.
Inside the Althingi parliament. Copyright: Icelandic Photo Agency.
The employees of the Reykjavík City Theater have decided to read the report in its entirety—all 2,000 pages of it—on stage. Admission is free.
According to a statement on the theater's website, actors will not attempt to interpret the content of the report. The reading will begin as soon as the report is made public and will continue, day and night, until the report is finished.
Around 45 actors will participate in the reading, which is estimated to take three to five days. People are welcome to attend the reading in part or in whole. The theater will be open 24-hours a day and the reading will also be broadcast live on the theater's website.
The theater is hoping to become a sanctuary from the media circus, where the report is likely to be interpreted in a number of different ways, where people can come, listen and contemplate on the report's content without harassment from the outside world.
The theater is keen on being an active participant in discussions in society and cover topics important to the community. Since the banking collapse the theater has incorporated current affairs into its program in various ways, the statement reads.
Says it all, doesn't it?
David Oddsson leaves Iceland ahead of bank crisis report release
Posted on09 April 2010.
david-oddssonDavid Oddsson, Iceland's former Prime Minister and central bank manager and current joint editor of Morgunbladid newspaper, will be overseas when the Althingi report into the banking crisis is released on Monday.
According to Visir.is, it is not known where he has gone or for how long, but it has apparently been confirmed that he will not be in Iceland when the so-called black report is released.
As Oddsson was in charge of the Central Bank of Iceland when the banking collapse occurred, it is almost certain the report will look closely at him and his work.
As such a key character in this soon-to-break news, Oddsson's departure from Iceland could be due to a desire not to be in charge at Morgunbladid on days when the news is going to be about him personally.
Icesave causing Paris Club headaches
Icesave causing Paris Club headaches
Posted on20 March 2010.
The Icesave issue has been discussed more than once by the Paris Club, an organisation more used to talking about the debt problems of third world nations. Individual financial officials in the 'club' expressed their deep concern that Iceland's hard stance could set an unwelcome precedent.
The Paris Club is an informal association of economic officials from 19 wealthy nations who meet every few weeks. The Club's meetings take place in complete secrecy. At the meeting, wealthy creditor nations make decisions on how to deal with mainly third world debtor nations and work on the terms and schedule of repayments and whether to write certain debts off. Unanimity is key to the Paris Club, meaning for example that no single member nation can offer greater concessions to debtors than all the others, according to RUV.
The Icelandic state broadcaster attempted to interview members of the Club but was repeatedly brushed off by an organisation seemingly worried that Icelandic defiance could make the job of policing world debt a little harder.
Iceland's Referendum -- At Last the People Can Choose
Ann Pettifor
New Economist, Author, "Debtonation - The Coming First World Debt Crisis"
Posted: March 5, 2010 06:00 PM
Iceland's Referendum -- At Last the People Can Choose
By Ann Pettifor and Jeremy Smith, Advocacy International.
The people of Iceland have a deep democratic tradition. In Saturday's referendum they have the opportunity to assert their sovereignty and autonomy.
Their leadership and example will encourage people in other democracies to reject harsh cuts in public services and living standards made at the behest of the very people and institutions -- the bankers and the regulators -- responsible for the crisis.
For through the wholesale nationalization of private losses, we are all -- not only in Iceland -- asked to pay the price of private, reckless risk-taking.
The Sorry Saga So Far
It all dates back to October 2008 when the Icelandic bank, Landsbanki, collapsed, and the British and Dutch governments decided to bail out their own citizens who had savings in Landsbanki.
They then turned to the Icelandic government and demanded reimbursement. Under European law, each country must have a compensation scheme (up to a defined limit) for when a bank goes bust. But no one had envisaged -- or funded for -- a large-scale meltdown such as occurred in Iceland. So Iceland's (private law) Fund couldn't pay up.
There follows a long saga of the British and Dutch trying to force the Icelanders to accept a retrospective "loan" on harsh and one-sided terms, so that they can get a sovereign guarantee from the Icelandic government to enforce it!
The terms would impose a new debt burden of 12,000 Euros per Icelander (man, woman and child). The Financial Times rightly calls their tactics 'bullying' -- they include blocking new aid from the IMF and others unless Iceland accepts the terms.
And that is what the referendum is about -- whether to authorise the government of Iceland to give a sovereign guarantee that come hell or high water, the British and Dutch will be repaid -- including high, profiteering rates of interest.
And without the Dutch and British sharing a single Euro of the burden.
A key principle in resolving the dispute is co-responsibility. Iceland's President Grimmson has made a similar point, referring to "a shared international responsibility."
The previous Icelandic government allowed a deregulated financial sector to run wild. The subsequent collapse of Iceland's banking sector was not a sudden bolt from the blue. The risks were visible and widely reported. And the deposit guarantee scheme was totally under-resourced to deal with a systemic meltdown.
So Iceland cannot escape some share of political responsibility for the Icesave fiasco.
But Iceland was far from alone in this negligence. The political establishments of Britain and the Netherlands -- indeed, those of the European Union and EEA as a whole -- encouraged financial deregulation and a more extensive Single Market in financial services, without almost any regard for the wholly predictable risks of large-scale economic failure.
Not a Sovereign Debt Crisis
The British and Dutch governments have, by political sleight of hand, given the world the impression that this is an issue of sovereign debt default.
This is quite false. It is a crisis of EU regulatory failure, and of the Anglo-American economic model.
The British and Dutch governments chose, for understandable reasons, to compensate domestic Icesavers whose deposits were at risk. They did this without consulting the government of Iceland. But from the start, they used economic and political force majeure to try to place the whole burden of compensation on to the state and people of Iceland. Only retrospectively, and through duress, was an agreement made with Iceland's Depositors and Investors Guarantee Fund to compensate the British and Dutch governments for the cost of bailing out their own citizens.
This retroactive arm-twisting is now defined as a loan contract - even though the "loan" was not contracted at the outset by the borrower, but forced on it by the "lenders". And the UK and Dutch governments' fiercely desired, but missing, link of an onerous sovereign guarantee is still.... missing!
The terms
The proposed interest rate of 5.5% is particularly unfair, and contains a large element of profiteering, given that the UK's Financial Services Compensation Service has, according to the UK Treasury, "financed its payout [to UK depositors] through a loan from the Bank of England."
The Treasury does not disclose the rate of interest on this loan -- a rate over which it had absolute discretion. The Bank of England's base rate is today 0.5% (1.5% in January, 2009). The ECB's base rate was 2.0% in January 2009, yet the Netherlands government had even greater audacity in seeking, initially, interest at 6.7%!
What Are the Strategic Options for Iceland and Its People?
One option in the referendum is for Iceland to accept the proposal based on force majeure, to pay the full price demanded (cuts in public services, unemployment, widespread emigration...) and hope to slowly rebuild the fabric of the Icelandic economy. However this strategy will make recovery and reconstruction in the short run well nigh impossible.
And in the long run, as JM Keynes argued, we are all dead!
All other options would be enhanced by a strong rejection of the UK/Dutch proposal, since the bigger the turnout for a 'no' vote, the stronger Iceland's negotiating position will be, whichever option is adopted.
The dispute could be referred to the courts, to arbitration or (preferably) mediation. It is a striking feature of the story so far that the UK and Dutch governments have gone to great lengths to avoid legal resolution of the dispute, despite the Icelandic government's constant denial of legal liability.
This may be sensible, since the 1994 Directive is badly drafted, and the outcome unpredictable for all.
Winning Hearts and Minds
After the referendum it will be vital that the government and people of Iceland inform and win over public and official opinion in Britain and the Netherlands, and the EU.
To date, the issues have not been clearly explained to the British and Dutch publics. As a result, the two governments are under little public pressure to change their strong-arm tactics.
The voices of the Icelandic government and of Icelandic civil society need to be heard more loudly in more targeted campaigns in the UK, the Netherlands and EU. Coming general elections in both countries will make this difficult in the short-term, but in the long-term the Icelandic position is bound to prevail -- if put across coherently.
Now is the time to spread more understanding of the issues -- the shared responsibility, the flawed and excessive nature of UK and Dutch government demands, their impact on ordinary Icelandic citizens, and the positive ideas and proposals that emerge as a result of democratic debate in Iceland.
In this way we can lay the foundation for a just resolution of the dispute.
And maybe, just maybe, the message from Iceland may be heard by ordinary citizens in other, larger nations, being told they have to make huge sacrifices to pay for the recklessness of bankers and the failures of look-the-other-way "regulators". We, the people will decide!
Democracy -- now, there's a radical idea...
Iceland's Pyrrhic Victory
Iris Erlingsdottir
Iris Erlingsdottir
Icelandic journalist and writer
Posted: March 8, 2010 01:53 PM
Iceland's Pyrrhic Victory
As expected, Iceland's voters overwhelming rejected legislation to settle their country's dispute with the United Kingdom and the Netherlands regarding the government's liability for losses suffered by the depositors of the IceSave accounts when its parent--Landsbanki--collapsed in 2008.
The voters are rightfully angry about the matter. The Icelandic financial regulators failed to assert any meaningful control over Landsbanki's rapid ascension in the 2000s. When the house of cards began to fall after Lehman Brothers default, Landsbanki offered high interest saving accounts over the internet for depositors in a last-ditch effort to maintain liquidity. The Icelandic government at least implicitly guaranteed the deposits, as required under European Economic Area (EEA) rules, but failed to properly evaluate the level of risk or to charge the bank an appropriate premium. As a result, the deposit insurance fund was incapable of meeting the 20,887 euro guarantee, or about 3.7 billion euros for the non-Icelandic accounts. The British and Dutch governments seized Landbanki assets within their countries, immediately paid their domestic depositors to avoid a run on their banks, then asked how Iceland intended to repay them.
There is little doubt that the initial IceSave settlement agreed was unrealistic. It called for a high (5.5%) rate of interest. It did not spread responsibility for the lack of regulation to the British and Dutch regulators. The Icelandic negotiators did not effectively point out that the sum being sought would impoverish their country for a generation.
"The Icelandic Economic Wonder." Courtesy of Halldór Baldursson, www.mbl.is
The voters also feel that holding the entire nation liable for the actions of a few incompetent and/or corrupt bankers is deeply unjust. Any repayment, it appears, would let them off scot-free. Not one banker has been sent to jail or forced to regurgitate any ill-gotten gains. Not one regulator has been fired. The politicians who oversaw (and profited from) the bank deregulation remain in power and, if anything, they and their buddies are in a better position than ever.
The British, in particular, have been demonized for their actions in this matter. Their invocation of anti-terrorist legislation to freeze all Icelandic bank accounts after Glitnir collapsed is seen by some to be the cause of the collapse of Landsbanki and Kaupthing. The fact that Iceland has been a NATO ally for decades was seen as meaning nothing, and this was seen as a personal insult to the Icelandic people.
It is widely rumored that the seized assets will be sufficient to cover nearly the entire IceSave debt. As a consequence, the British and the Dutch are seen as bullies, kicking a weaker neighbor while it's down, for no reason.
So the voters were right on nearly every front. The UK and Holland should accept some responsibility for the debt. The agreement was unconscionable. The Icelandic nation should not be left destitute to cover debts that amount to very small fractions of those countries GDP. The wrongdoers should be forced to pay for their wrongdoings.
In the end, however, I am reminded of King Pyrrhus's response to congratulatory messages he received after suffering heavy losses while defeating the Roman army at Asculum in 279 BC: "Another such victory and I am undone."
It is almost certain that Iceland's access to desperately-needed capital will be cut off. It is unlikely that the IMF (or anyone else) will provide any additional funds until the matter is resolved. Iceland's already low sovereign rating will be downgraded even further, requiring the government to pay even higher interest rates. Iceland will never get into the European Union without support from the United Kingdom and Holland.
Of equal importance is the fact that the ruling coalition has been gravely damaged. The petition for a referendum was spearheaded by the opposition parties. It is a very distinct possibility that the parties that got us into this mess will be returned to power in short order.
The IceSave matter has taken the country attention away from many other pressing matters. While we have been endlessly debating IceSave, our unemployment rate has continued to climb, the number of insolvencies has continued to increase, and the number of public services has continued to decrease. Other scandals of comparable magnitude and abuse of taxpayer money--but involving only Icelanders--are being ignored by the Icelandic media.
We scored some points by rejecting the IceSave agreement, and we'll probably get a marginally better deal from the Brits and the Dutch. Unfortunately, though, we're probably worse-off overall financially, and we've lost valuable time, energy, and focus as a result. Any more "victories" like this, and we'll be next to King Pyrrhus in history's waste bin.
Hi Gordon45, we do our best
Hi Gordon45, we do our best to keep information flowing, its such a web of intrigue at times!! Far better we let each concentrate on what they do best I feel, no point in all covering the same ground, lifes to short!
One day they'll be a decent book in this, in the mean time try Roger Boyes "Meltdown Iceland", a reasonable, if thin overview of all this.
Take care and don't let it run your life!!!
But here's an article that should keep people thinking about banking in the UK.
New credit crunch risk as banks face funding crisis
Britain is facing a second credit crunch as banks shrink their loan books to avoid a funding crisis, a leading analyst has warned.
By Philip Aldrick in the Daily Telegraph
Published: 10:46PM GMT 09 Mar 2010
Jonathan Pierce, from Credit Suisse, believes UK banks will have to reduce the size of their balance sheets by as much as £530bn over the next three to four years to meet new regulations.
According to his analysis, British banks need to issue £420bn-£750bn of long-term wholesale funds. "We don't think this is plausible and hence we expect balance sheet footings to fall by 6pc-18pc to compensate," he said. He predicts a minimum reduction in credit of £200bn.
UK banks gorged on cheap wholesale funding during the boom to finance a glut of mortgages and commercial property loans. However, the wholesale markets slammed shut after Northern Rock's collapse and are only just reopening.
The Government filled the gap by providing £319bn of emergency funding, which starts to be repaid next year. The higher funding costs will cause "a loss of 10pc-25pc of net interest income", Mr Pierce said.
The biggest problem is with Lloyds Banking Group, which needs to raise £185bn-£305bn. "We believe it will have to shrink its assets by £110bn-£230bn," he said.
"Lloyds believes it can manage the deficit through
a more modest reduction, and has suggested the impact on financials will not be significant. We can't square this with our numbers."
Credit Suisse said the pressure on balance sheets will be greatest at the state-backed lenders, Lloyds and Royal Bank of Scotland, for which it assumes "a balance sheet reduction of about 20pc each – a somewhat bigger net contraction in assets than suggested by management".
The pressure on balance sheets threatens to lead
to further financial protectionism as banks reduce their overseas lending to protect their home market clients and reputation.
According to the Bank for International Settlements, cross-border lending contracted by $3 trillion (£2 trillion) last year.
Icesave negotiations to continue next week?
Icesave negotiations to continue next week?
Posted on06 March 2010. Tags: Iceland, Icesave, netherlands, Politics, UK
londonThe British and Dutch authoritites have apparently indicated that they will be willing to hold more Icesave talks next week.
Icelandic Finance Minister Steingrimur J. Sigfusson revealed this information while speaking on television last night, saying the British and Dutch intend to hold back from discussions while today's referendum goes ahead; but are ready to continue the process next week.
Meanwhile the referendum on the December Icesave law is happening right now. Initial results are expected to appear shortly after the polls close this evening. Icelanders are widely predicted to vote against the controversial repayment deal with the UK and the Netherlands.
Icesave referendum ends, first results released
Posted on06 March 2010.
Iceland-Referendum01Icelandic polling stations closed at 22.00 and initial results are being released immediately.
Voter turn out was lower than in the last parliamentary election.
With 74,151 votes counted so far nationally, 68,993 of voters have chosen to reject the December Icesave repayment deal. 93.1 percent of votes nationally have been 'no' votes and 1.6 percent 'yes'.
19,300 people voted in Reykjavik North. 356 said yes, 17,738 said no and 1,206 empty ballots were cast in protest. 19,500 people voted in the Southwest region. 250 voted yes, 18,350 voted no, 850 ballots were empty and 50 were invalid.
Prime Minister Johanna Sigurdardottir told RUV that she is not at all surprised at the result because the law the people were voting on is in fact no longer relevant as a better deal has already been offered. Finance Minister Steingrimur J. Sigfusson said he is personally surprised at how many people voted yes. Both say they are confident that the referendum outcome will not break up the government.
Icelands refurendum, views
From Icenews
'No' to Icesave does not damage Iceland's credit rating
Posted on09 March 2010.
The result of Iceland's so-called Icesave referendum has no effect on the creditworthiness of the nation, at least not directly. This is the conclusion of the ratings agency Standard and Poor's, which published its report yesterday.
The fact that the 'no' vote was so widely predicted means the outcome of the vote has had no effect on Iceland's creditworthiness. Standard and Poor's also makes special note in its report that the referendum rejected a proposed repayment plan from December; it did not reject repayment of Icesave deposits to the Netherlands and the UK altogether.
The report says Iceland's sovereign credit rating will be revisited once it has become clear whether or not the referendum has had an effect on Iceland's international IMF-led reconstruction package. The IMF's latest review is due soon. There is still a lot of uncertainty surrounding Iceland's rescue package while the Icesave issue goes unresolved.
Standard and Poor's has already taken into account the fact that the Icesave issue could potentially remain unresolved for a long time due to upcoming elections in both the Netherlands and the UK; but believes, on the other hand, that the Icelandic government will not fall due to Icesave, RUV reports.
After the referendum, Finland says not until Icesave resolved:
Ditto Sweden:
Iceland's PM Calls Icesave Referendum "Pointless"
05/03/2010 | 11:30
Iceland's PM Calls Icesave Referendum "Pointless"
Prime Minister of Iceland Jóhanna Sigurdardóttir is not going to vote on the Icesave legislation in the referendum tomorrow.
"I think it is pointless and very sad that the first referendum that is held since the republic was founded will be about a legislation that has already become obsolete," Sigurdardóttir told Fréttabladid.
"No one is talking in favor of this legislation anymore; the situation has changed so much in the past weeks and we already have a more favorable solution worth 70 billion [USD 545 million, EUR 401 million] in debt burden," the prime minister added.
Yesterday evening Sigurdardóttir said there are no indications that a new agreement on Icesave will be reached between the governments of Iceland, the UK and the Netherlands before the referendum tomorrow.
However, she hopes that negotiations can continue next week, emphasizing that a solution must be reached as soon as possible.
"I fear that the delay will cost us more than what we would benefit from a new agreement. ASÍ [the Confederation of Labor] say that this issue has already delayed the [economic] restoration by six months with the accompanying costs," the prime minister commented.
She said she has also noticed various misunderstandings regarding the referendum tomorrow.
"Some people seem to think that the issue will disappear if the legislation is rejected but that is a grave misunderstanding. It is also a misunderstanding that the issue will be taken straight to the courts. The three countries must decide that in unison and the British and Dutch have always rejected that way," Sigurdardóttir said.
The prime minister pointed out that if the Icelandic nation rejects the legislation from December 30, the legislation from August 28 will take effect. However, that legislation won't last.
"The British and Dutch didn't agree to that legislation and therefore it is not correct that we will start with a clean table. Then it isn't even certain that we will maintain the more favorable debt burden of 70 billion," the prime minister concluded.
Leaders of the opposition parties encourage people to go to the polls and vote against the Icesave legislation tomorrow, Finance Minister Steingrímur J. Sigfússon says people should make up their own minds whether they want to vote or not.
Chairman of the Progressive Party Sigmundur Davíd Gunnlaugsson believes that Iceland will be in a better position to negotiate if the legislation is rejected, reasoning that talks will continue at a clean table
Icelandic tycoons could regain control of empire
Icelandic tycoons could regain control of empire built on debt Bondholders owed £300m by Bakkavör Group vote to leave Gudmundsson brothers in place
by Simon Bowers guardian.co.uk, Monday 8 March 2010 21.04 GMT
The Gudmundsson brothers had 45% of Exista, the largest investor in Iceland's Kaupthing Bank, which collapsed in 2008.
Two of Iceland's most controversial tycoons could regain control of the rump of their business empire in the midst of deepening public anger in Reykjavik at the cost to ordinary Icelanders of the island's financial meltdown.
Lýdur and Ágúst Gudmundsson were the founders of Bakkavör Group, the holding company that built up one of Britain's largest food manufacturing operations before excessive borrowing propelled the business to the brink of collapse.
However, the brothers, who are based in London's exclusive Belgravia district, have signed a restructuring agreement that could see them regain control of the empire – the latest in a string of unpopular deals inflaming popular opinion on the North Atlantic island.
Many Icelanders are furious at a handful of so-called "business vikings", including the Gudmundssons, who led stock market-listed companies on a blaze of debt-fuelled overseas acquisitions, particularly in the UK, and developed close ties to the Icelandic banks that financed them.
Passions are already running high in Reykjavik after a referendum last weekend that overwhelmingly rejected legislation setting out how Iceland would repay £3.5bn in loans to the British and Dutch government. The loans were taken on after the UK and the Netherlands stepped in to cover deposit guarantees at the online bank Icesave, part of the failed bank Landsbanki, when it emerged that Iceland could not afford to do so.
Meanwhile, Bakkavör Group bondholders, who are owed £300m, have voted not to push the holding company into administration, a move that would have ejected the Gudmundsson brothers from the company. Instead, 98% voted for a restructuring package that maintains the tycoons' position at the top of the company and offers them an incentive package that could see them buy back 25% of the business. Bonds that were to mature last year have been reset, falling due in 2014.
Built through a blazing trail of UK acquisitions, Bakkavör is one of the largest suppliers of ready-meals, pizzas, curries, desserts, salads, soups and dips to all of Britain's largest supermarkets. Having swallowed such well-established food companies as Katsouris Fresh Foods, Geest and Laurens Patisseries, by 2008 Bakkavör had UK sales of £1.39bn.
But the heavily indebted Icelandic parent company, where Lýdur and Ágúst Gudmundsson are chairman and chief executive respectively, was unable to meet a bond repayment deadline in March last year, forcing Bakkavör Group, listed on the Icelandic stock exchange, into emergency talks with its bondholders.
After months of negotiations, the bondholders – largely Icelandic banks and pension funds – found they had a weak hand. The Icelandic holding company had almost no assets other than stakes in operating subsidiaries; meanwhile, the subsidiaries had themselves taken on considerable debts secured against nearly all factories. Moreover, written into the terms of loans taken on by Bakkavör subsidiaries were clauses allowing lending banks to call in debts should the Gudmundssons lose control of Bakkavör Group.
The Gudmundssons – known as "the Bakka brothers" – saw most of their paper fortune disappear with the failure of Iceland's largest bank, Kaupthing, in 2008. They had a near-45% holding in the financial group Exista, in turn Kaupthing's largest investor before its demise.
In the days after the failure of Kaupthing, Exista controversially agreed to sell its stake in Bakkavör to a company controlled by the Gudmundssons. This share sale has since been unwound and is the subject of an investigation by state prosecutors in Iceland. Six weeks ago it led to police raids at the brothers' homes in London, as well as the offices of Exista in Paddington and Bakkavör's UK headquarters in Lincolnshire.
As well as its close ties with Kaupthing through owning almost half of Exista, the Gudmundssons' empire was a major client of the bank. Exista itself was the largest recipient of loans from Kaupthing, and the bank also lent to Bakkavör and advised it when it was floated on the stock market and through a series of acquisitions.
Hi Expat
Hi expat,
Just want to thank yourself for these two most informative postings on the DAG. People like yourself and Glen07 continue to give these most important updates, whereas others like myself and Icecrusher hopefully spend our time trying to show what we might get back based on what we know and guestimate.
Can't thank you enough as one person cannot cover all aspects.
Most appreciated,
Gordon 45
Icelands vote by Rowena Mason of the Telegraph
Iceland's vote gives UK little comfort
When one of the billionaires behind the collapsed internet bank Icesave was asked in a new film what happened to all the money, his answer was astonishingly nonchalant.
By Rowena Mason
Published: 7:41PM GMT 06 Mar 2010
"A lot of money goes to money-heaven," shrugged Björgólfur Thor Björgólfsson, the London-based investor who co-owned 41pc of Icesave's parent bank, Landsbanki.
"The value that has been wiped off the stock markets, and the deposits in the banks and investment funds have gone. They have evaporated. It's a common misunderstanding to ask, 'where did the money go'?"
Sigurjon Arnason quizzed in ongoing Landsbanki investigationThe money may have "evaporated" but Icesave's €4bn (£3.6bn) debts remain and are now the subject of fury in the businessman's home country.
On Saturday Icelanders became the world's first rebels against the idea of clearing up after the mess made by a reckless private bank. This popular insurrection has been watched anxiously by the governments in Greece, Ireland, eastern Europe – and even Britain – concerned that this defiance could become contagious.
Almost 18 months after its financial system, currency and government went into meltdown, the country is still spiralling downwards into what one economist has called a "vortex of debt default, unemployment, and an exodus of people".
Public outrage has been brought to a peak by the fact that there are now 43 cases of alleged criminal activity under investigation in connection with the country's scandal-hit financial institutions, including Landsbanki, and, in the country's first referendum, the 320,000 people of the island were expected to vote against a deal to compensate the UK and the Netherlands for the failure of Icesave.
The two governments lent Reykjavik the money to bail out Icesave's foreign savers when Landsbanki collapsed in October 2008 – but over the past year, Icelanders have become increasingly indignant about having to bear this cost, claiming it will make their already enormous debt mountain overwhelming. Some are angry at what they see as the unfavourable terms of the deal hammered out by the British, while others object to the principle of paying up at all, given the country's dire economic predicament.
Anti-UK feeling is running high, with resentment against the punitive 5pc interest rate that Iceland's leaders agreed to pay on the Icesave debt without consulting the electorate.
However, the rejection of the deal could have disastrous consequences for Iceland's international standing. The International Monetary Fund has threatened to withhold aid and Iceland faces potential default on a huge chunk of foreign debt due for repayment next year. Any delay to these "essential funds" could have a negative impact on the island's credit rating says Dragana Ignjatovic, of IHS Global Insight.
In Britain, the effects of the crash are also being felt. Not only is the Treasury bearing the Icesave debt on its balance sheet but it is owed another £500m for compensating savers above the guarantee limit for each account.
Councils, charities, hospitals and universities are facing several years of belt-tightening after investing a total of £1bn in Iceland's unstable financial institutions. And the retail sector is still reeling from a series of bankruptcies, after stakes in dozens of high street chains owned by Viking private equity companies were seized by the banks when they defaulted on loans.
The Icelandic government and state-run banks now own substantial stakes in Hamleys, House of Fraser, Iceland Foods, Oasis and Karen Millen. But the worst affected people – even more so than Icelandic and British taxpayers – are the 800 savers in Landsbanki Guernsey who lost access to their entire life savings. They were not covered by the UK Government's bail-out. Last month, they heard that they are not ranked as priority creditors, so they will never be fully compensated.
Robert Wade, professor of political economy at the London School of Economics, says Iceland's banks were doomed to fail before the impact of the financial crisis and their activities were prolonged by the void of responsibility at the heart of both the British and Icelandic regulatory systems.
"Beyond the banks, the whole Icelandic business model involved converting firms into investment funds, where productive assets were used as collateral to support foreign borrowing used for purposes of speculation or prestige," he says.
Landsbanki's biggest owners were Björgólfur Thor Björgólfsson and his father, the ex-owner of West Ham FC, Björgólfur Gudmundsson – two Icelandic businessmen with close links to the country's ruling Independence Party. They benefited from Iceland's move to privatise its banks in the early 1990s, despite the fact that Mr Gudmundsson had a conviction for false accounting, following the collapse of his shipping empire in 1985.
The pair had no experience in banking and were not the highest bidders. However, the privatisation helped catapult Mr Björgólfsson on to the Forbes rich list. At the peak of his wealth he had an estimated fortune of $3.5bn – now an estimated $1bn.
No one quite knows how Landsbanki and the other Icelandic banks managed to grow so big, so quickly. But it is now well-documented that some of the biggest shareholders of the banks were lending each other vast sums of money in a complex network of mutually beneficial business relationships. This had begun to worry financial observers by March 2006. Richard Thomas, an analyst at Merrill Lynch, said at the time: "We are seeing the classic signs of an overleveraged banking system and this has flashed a red alarm signal."
But by summer in the same year, the UK's Financial Services Authority had allowed Landsbanki to launch the Icesave internet accounts, outshining interest rates offered by other savings banks.Icesave was a branch of an Icelandic bank, so the Financial Services Authority claims it was "impotent" to rein in the bank's activities.
Sigrún Davídsdóttir, an Icelandic political commentator, said: "The FSA and British politicians have often mentioned that, because EU directives opened doors for the banks to set up shop in the UK, there wasn't anything UK regulators could do. I find this an exceedingly feeble argument – of course the UK regulators could scrutinise the banks had they felt the urge to."
Holding someone accountable for the creation of Landsbanki's enormous Icesave debt has become the obsession of Gunnar Sigurdsson, a film director who has just finished making a documentary about the crash, called Maybe I Should Have.
Starting at the Park Lane offices of Björgólfur Thor Björgólfsson, who denies any wrongdoing associated with Landsbanki's failure, Iceland's answer to Michael Moore embarks on a journey that takes him to the shiny offices of the banks in Luxembourg, the tax haven of Tortola in the British Virgin Islands and the Berlin headquarters of Transparency International, the body that once ranked Iceland the least corrupt country in the world. He found few answers and a lot of brick walls.
"We have not been told the whole truth yet about what was going on in these banks," says Mr Sigurdsson. "It was like everybody went to Glastonbury and had a drug-fuelled party and caused a huge amount of damage, but the police never turned up to stop things getting out of control."
Confidential Icesave documents leaked on Wikileaks
Confidential Icesave documents leaked on Wikileaks
Posted on27 February 2010. Tags: Iceland, Icesave, netherlands, UK, wikileaks
icesave1-03923947The final deals on offer from both sides in this week's Icesave negotiations have been released to the public on the Wikileaks website.
The British and Dutch final offer document shows that they have considerably lowered their interest demands on loans to Iceland to cover repayments for the failed Icesave internet bank accounts. However, Iceland's final offer document shows its negotiators still consider any additional interest charges to be simple profiteering and neither side has been willing to back down.
The Icelandic offer can be seen here: Icelandic_Icesave_negotiation_team_offer_to_UK_and_NL 25_feb_2010, and the British and Dutch offer can be viewed here: UK-NED ICESAVE proposal feb 2010. (Both are .pdf files)
Confidential Icesave documents leaked on Wikileaks
Posted on27 February 2010.
icesave1-03923947The final deals on offer from both sides in this week's Icesave negotiations have been released to the public on the Wikileaks website.
The British and Dutch final offer document shows that they have considerably lowered their interest demands on loans to Iceland to cover repayments for the failed Icesave internet bank accounts. However, Iceland's final offer document shows its negotiators still consider any additional interest charges to be simple profiteering and neither side has been willing to back down.
The Icelandic offer can be seen here: Icelandic_Icesave_negotiation_team_offer_to_UK_and_NL 25_feb_2010, and the British and Dutch offer can be viewed here: UK-NED ICESAVE proposal feb 2010. (Both are .pdf files)
Posted on27 February 2010. Tags: Iceland, Icesave, netherlands, UK, wikileaks
icesave1-03923947The final deals on offer from both sides in this week's Icesave negotiations have been released to the public on the Wikileaks website.
The British and Dutch final offer document shows that they have considerably lowered their interest demands on loans to Iceland to cover repayments for the failed Icesave internet bank accounts. However, Iceland's final offer document shows its negotiators still consider any additional interest charges to be simple profiteering and neither side has been willing to back down.
The Icelandic offer can be seen here: Icelandic_Icesave_negotiation_team_offer_to_UK_and_NL 25_feb_2010, and the British and Dutch offer can be viewed here: UK-NED ICESAVE proposal feb 2010. (Both are .pdf files)
Posted on27 February 2010. Tags: Iceland, Icesave, netherlands, UK, wikileaks
icesave1-03923947The final deals on offer from both sides in this week's Icesave negotiations have been released to the public on the Wikileaks website.
The British and Dutch final offer document shows that they have considerably lowered their interest demands on loans to Iceland to cover repayments for the failed Icesave internet bank accounts. However, Iceland's final offer document shows its negotiators still consider any additional interest charges to be simple profiteering and neither side has been willing to back down.
The Icelandic offer can be seen here: Icelandic_Icesave_negotiation_team_offer_to_UK_and_NL 25_feb_2010, and the British and Dutch offer can be viewed here: UK-NED ICESAVE proposal feb 2010. (Both are .pdf files)
From the Times March 6
From The Times March 6, 2010
by Janice Turner
Don't be a money muggle. You can't afford it
In Iceland and in England, the financial wizards are banking on our ignorance. We must break their spell
Recommend? (2) In Reykjavik the air was minus 3C; inside the "hot pot", the water a bum-boiling 42C. Postponing the chilly skitter to the changing rooms, I got talking to the woman beside me, and, as always on this holiday, couldn't resist asking how she was finding, y'know, the global financial meltdown.
Call me an economic rubbernecker — or just a hack — but while I'd always longed to visit Iceland because it is the planet's geology pop-up book and unlikely nexus of cool, I'd come ultimately because it was bankrupt. What does a wrecked Western economy look like? I had to see. Would there be dereliction, panic, seething unrest, like the demonstrations outside the country's parliament building a year back when Icelanders pelted ministers with skyrr (the excellent native yoghurt)?
None of that now. Enormo 4x4s glide through the city; we queue for the nicer restaurants; people are well-clad and seem purposeful, not desperate. Then my husband went into a bank to withdraw € 400 to pay our landlady. "Is it for an Icelander?" asked the cashier, like some Soviet functionary. "Why does she want euros?" He was forced to take krona instead. And you realise, whatever the appearance of getting by, these people are no longer free, but tethered by their withered currency to their black, volcanic moonbase.
At the swimming pool, however, my neighbour was sanguine. "Oh, I've stopped reading the papers," she said when I asked about the Icesave referendum, in which this weekend her nation will vote on whether to repay British savers fleeced by Icelandic bankers. "We were all so upset at the time [August 2008]; people thought they'd lost everything. But we've got a bit bored with it now, and, well, life goes on. There will always be . . ." — she gestured at the steaming water and laughed — ". . . hot pots!"
Britons and Icelanders are supposedly locked in mortal conflict. They hate us, we're told, for misusing anti-terrorism legislation to freeze their assets when Landsbanki crashed, and because we are a big brute nation imposing punitive interest rates on debts owed by a population the size of York/Croydon/Basingstoke (insert comedically provincial place here). Except that I enjoyed nothing but hospitality and kindness, and anyway, rather than being enemies, we are bound by a similar fate.
Both our countries are lingering in an eery stasis, waiting for the bad to happen. When it comes, what it will bring, we are not yet sure. Icelanders won't know even after this referendum what level of personal privation their national debts will entail. Meanwhile, Britons tread water, being told this deficit reduction business will be grim, but not how grim since our political leaders won't muster the guts to provide details until safely elected.
In waiting we have lost focus, forgotten the cause of the crisis and, since anger is exhausting to sustain, grown tired of flinging yoghurt. In Iceland, the alternative press quips that the nation could return to solvency by growing high-grade skunk in its geothermal greenhouses. And despite scary levels of negative equity on their mostly spanking new flats, Icelanders shopped ferociously this Christmas. And so while the citizens they ruined are smoking or spending or joking, the Icelandic venture capitalists who deliberately targeted the savings of ordinary British families through Icesave are still not in jail. Here in Britain we have grown more prone to rage when MPs get an extra £1,000 a year than when our busted state bank RBS awards itself bonuses totalling £1 billion.
At root, the problem is our own financial illiteracy. I speak for myself here, and for every other business-page-binning fool who thinks it cool, arty and kinda classy to say you don't "get" money. Because how can we take to task the bankers when, like muggles oblivious to the workings of the wizard world, we can't even comprehend what they do?
A friend of mine, a smart, well-educated woman, invested in Icesave. Well, why not, since it gave 5.2 per cent interest and beat all the other deals on those online best-buy lists? Yet she had no inkling of the first principle of finance — interest is higher because risk is greater. And neither did I. But I do now.
I've just read a remarkable book, Whoops! by John Lanchester, that in elegant phrases and witty analogies, explains the crisis to the economically dyslexic in a way that actually sticks. So, to my amazement, I finally grasp stuff such as leverage, credit default swaps, derivatives and am angry with my ditsy former self who dismissed these as the domain of the boring City types you get lumbered with at parties.
Now I have a hunger to understand more; to my amazement, I am casting aside Heat magazine and reaching for The Economist. And I am not the only one to whom it has dawned too late that we are living in serious times and that it is our duty to understand. Lanchester's book is high up in Amazon rankings, and when I saw David Hare's new play The Power of Yes — principally, a two-hour, no-interval economics lecture — there was an intense, studied silence. The audience was packed with liberal, middle-class people who, like Hare himself, would not dream of failing to grasp the political dimensions of a war or a foreign calamity, yet who let the bankers run amok because they regarded their trade as somehow beyond and beneath them.
Strangely, what I have learnt from my baby steps into financial waters is — aha! — I was right all along. My instincts, my natural suspicion of something for nothing, meant that I'd have spotted this would all go tits-up. Dubai's new money always looked funny to me, as did Ireland's. I was long concerned about young people maxing out credit cards; indeed, when invited to Downing Street three years ago, I ranted about personal debt to a startled Gordon Brown.
So we econo-idiots, those of us who have to ask someone every Budget day to "explain interest rates to me again", should not give up. In Iceland and Britain, nothing has changed yet. This is too serious a time to disengage. We must learn and use knowledge to stoke our anger. The wizards are counting on our ennui: they plan to fly away before we disarm their spells.
Gordon Brown to intervene??
Iceland's president demands that Gordon Brown intervenes in payback row
Iceland's president has demanded that Gordon Brown personally agree a reduction in the multi-billion pound bill his country faces to compensate British customers of failed internet bank Icesave.
By By Richard Tyler
Published: 12:29PM GMT 06 Mar 2010
Last ditch talks between the two countries and Netherlands were suspended last night ahead of a referendum today, which was triggered by president Olafur Grimsson in January when he refused to approve the compensation deal.
Polls suggest that as many as three-quarters of Icelanders will vote 'No' to paying £2.3bn to Britain and £1.2bn to the Dutch.
The vote will formalise a public backlash that has become Iceland's latest stumbling block on the difficult road out of a deep recession, jeopardising its credit rating, access to bail-out money from the International Monetary Fund and entry to the European Union.
Britain and the Netherlands last week offered better terms – including a floating interest rate on the debt plus 2.75pc, which represents a significant cut on the 5.5pc under the original deal hammered out at the end of last year.
But Iceland walked out on talks in London, turning down what the UK described as its "best and final offer".
Speaking to the BBC today, Mr Grimsson said: "What is important following this referendum and in the light of the outcome is that the leadership of Britain and the Netherlands, especially Gordon Brown, will now take the matter into his own hands, which he has not done.
"He [should] show, in the light of the progress which has been made recently, a similar type of statesmanship as he did a year ago on the global financial crisis.
"All the political parties in Iceland and the overwhelming majority of the people have said they will accept a fair deal. If a new agreement is fair, I don't think there will be a need for a [second] referendum."
Mr Grimsson insisted that Iceland was not trying to dodge its share of responsibility for the money lost when Icesave collapsed in 2008.
"There is unanimity in this country that we will repay what is equivalent to 20,000 euros per depositor," he said.
But he denied that Iceland should take sole responsibility: "According to the European financial regulations under which the Icelandic banks operated, it was a shared responsibility of the regulatory authorities in Britain and Netherlands as well as in Iceland."
Although the International Monetary Fund has never explicitly linked delivery of a $4.6bn loan to the reaching of an Icesave deal, it is connected to Iceland repaying its international debt — the months taken to reach the original Icesave deal were responsible for holding up the first tranche of IMF funds last year.
There are also fears that Britain and the Netherlands will take a hard-line stance on Iceland's application to join the EU and refuse to approve the start of accession talks until an Icesave deal is signed into law.
Those are factors that Iceland can do without as it struggles to recover from a rout in which most of its banking system collapsed.
The Icelandic government has forecast the economy will contract 2pc to 3pc this year, after shrinking 7pc last year.
"Several months' delay could deepen the 2010 contraction to about 5pc," economy minister Gylfi Magnusson said this week.
British stage last push to cancel Icesave vote
British stage last push to cancel Icesave vote
Posted on28 February 2010. Tags: britain, Iceland, Icesave, UK
icesave1-03923948The British government has requested further talks with Iceland's negotiators over the Icesave issue. The British want to come to a deal that will stop next Saturday's referendum on the December deal going ahead.
Following the unsuccessful talks which ended on Thursday with the British and Dutch, the Icelandic team intended to travel home on Friday but British authorities wanted them to stay. It was decided that a part of the team, including Lee Buchheit, would stay in London. Negotiators Gudmundur Arnason and Larus Blondal arrived in Iceland on Friday but returned to London again yesterday.
British and Icelandic representatives met yesterday and intend to continue their talks today.
According to Visir.is, the British are making a concerted last minute effort to stop the Icelandic public voting in Saturday's referendum on a loan deal agreed by parliament in December. Senior civil servants and politicians in London fear the expected 'No' vote could prove a dangerous precedent to other countries in financial difficulties. They do not want the general public to be able to decide matters of national debt, Visir reports.
Dutch officials are not at this weekend's meetings, as the Netherlands is currently being governed by a caretaker administration with little or no real power to negotiate international treaties.
If the Icelanders and British are able to hammer out a deal though, it is considered likely the Dutch would also accept it.
Iceland Icesave referendum approaching fast
Posted on25 February 2010. Tags: Iceland, Icesave, referendum
voting1Around 1,300 people have already voted in Reykjavik in the Icesave referendum as they live overseas or will be unavailable next Saturday. Everyone else in Iceland has to wait a further nine days until the polling stations open.
Absentee voters are also casting their 'yes' or 'no' votes at district commissioners' offices around the country. There are 230,014 people registered to vote in the referendum.
Despite some politicians' hopes that renegotiation of the Icesave deal would get in the way, it now seem highly likely the referendum will go ahead as planned with polls consistently suggesting the December law will be rejected by voters.
Dutch Icesave offer received in Reykjavik
Dutch Icesave offer received in Reykjavik
Posted on20 February 2010. Tags: Iceland, Icesave, netherlands
votingIceland's negotiators have been going over a proposal received this afternoon from the Dutch government with regard to repaying the country for the failed Icesave savings accounts.
The Icelandic government and opposition leaders will meet this evening to discuss the new offer. It is not yet clear if the new proposed deal is a joint effort with the United Kingdom or solely related to Icesave in the Netherlands, Visir.is reports.
The offer arrived in Reykjavik despite the recent news of the collapse of the Netherlands' government. It is thought, however, that a working government can be maintained in the country until new elections this spring.
The Labour Party, which left the government and is led by Finance Minister Wouter Bos, has been the most positive towards Iceland. Polls suggest that both Labour and its coalition party the Christian Democrats would lose many seats if elections were held today. The likeliest next government would be the Liberal Party, which has taken a particularly hard line against Iceland in the Icesave issue.
The new repayment offer reportedly includes a floating rate of interest which will significantly reduce the overall amount payable by Iceland.
Iceland Upbeat on Icesave Agreement
Iceland Upbeat on Icesave Agreement
By REUTERS
Published: February 18, 2010
Filed at 3:47 p.m. ET
Skip to next paragraph Reuters
REYKJAVIK (Reuters) - Iceland expressed optimism on Thursday it was close to a new agreement with Britain and the Netherlands on the country's "Icesave" debts, a deal which could unfreeze vital foreign aid.
Officials from the three countries have been meeting in London all week on how Iceland will repay Britain and the Netherlands more than $5 billion (3.2 billion pounds) lost in Icesave online accounts when Icelandic bank Landsbanki collapsed late in 2008.
The government of the North Atlantic island nation said the Icelandic negotiators were now on their way to Iceland to meet with officials there, but declined to comment on the outcome of the talks in London.
"They are on their way back. They will come home and meet up with ministers and politicians of the opposition tomorrow and brief them on what happened in London," Icelandic Finance Ministry spokesman Elias Gudjonsson said.
Gudjonsson said the negotiators were returning to consult with politicians on how to proceed in the efforts to bring the long-standing dispute to a close, but declined to elaborate.
Earlier on Thursday, Foreign Minister Ossur Skarphedinsson told state radio he was "cautiously optimistic" about finding a solution and that he expected a response from Britain and the Netherlands later on Thursday or in the coming days.
"There is a clear will on the side of the British and the Dutch to review the agreement," Skarphedinsson said, although he warned that the talks still could go either way.
Aid from the International Monetary Fund and others has been held up pending a final deal. Icelandic voters are expected to nullify an existing agreement in a referendum on March 6.
Skarphedinsson spoke after the Financial Times newspaper reported on Thursday that Britain's finance minister Alistair Darling had cleared the way to soften Iceland's repayment terms.
It said officials had discussed an "interest holiday" for part of Iceland's 7-year grace period on the debt. Another option could be a floating interest rate for part of the repayment period, as opposed to the fixed 5.55 percent rate agreed to last year.
Cutting a new deal would be "in the best interest of all three countries," Skarphedinsson said. Although he was optimistic, he said the meetings could still go either way.
A spokesman for the Dutch Finance Ministry had no comment on the substance of talks and repeated the Dutch and British remained in agreement on their position regarding Iceland.
Iceland needs to solve the Icesave issue so it can get much-needed aid from the IMF and its Nordic neighbours and start to put its economy back on normal footing after a withering recession.
Parliament passed a bill setting out repayment terms in December, but the president refused to sign, triggering the referendum. The refusal came after an outpouring of anger on the island over the deal, whose terms were seen as overly harsh.
If, as seems likely, voters reject the bill on March 6, Iceland will still need to reach a new agreement with the British and the Dutch.
(Additional reporting by Ben Berkowitz in Amsterdam and Nick Vinocur and Niklas Pollard in Stockholm; Editing by Michael Roddy)
The Dutch Launch Investigation Into Icelandic Lies
12/02/2010 | 11:35
The Dutch Launch Investigation Into Icelandic Lies
Dutch Minister of Finance Wouter Bos has ordered an investigation into allegations made by the Central Bank of the Netherlands that Icelandic authorities lied about the situation of the Icelandic banking system in the lead-up to the banking collapse of October 2008, dutchnews.nl reports.
The headquarters of Landsbanki in Iceland. Photo by Páll Stefánsson.
Both Dutch Central Bank chief Nout Wellink and Arnold Schilder, former Dutch banking supervisor, have stated in interviews with a Dutch parliamentary committee investigating the global economic crisis that Icelandic authorities provided false information on the financial health of Landsbanki, which opened Icesave in the Netherlands in the spring of 2008, mbl.is reports.
Wellink told the Dutch media yesterday that he has documents that prove that Icelanders promised to guarantee all deposits in the Icesave accounts.
Björgvin G. Sigurdsson, MP for the Social Democrats, who served as minister of business and banking in Iceland at the time of the collapse, reacted harshly to Wellink's allegations of lies, calling them a misinterpretation of reality, visir.is reports.
Sigurdsson stated in an article in the Dutch newspaper De Volkskrant this week that French authorities had known that there was no state guarantee on Icesave and that they had therefore refused to open the accounts in France.
However, a spokesperson for Banque de France said Landsbanki never applied to open Icesave accounts in France.
The Dutch media, including the news website De Verdieping Trouw said that statement is interesting considering Sigurdsson's claims in De Volkskrant, which he used as counterarguments for Wellink's allegations.
Icelandic comment - what should be done with banking officials
An excellent article from The Huffington Post -
Iris Erlingsdottir
Icelandic journalist and writer
Posted: February 10, 2010 05:56 PM
Moral Hazard in Iceland
One of the fundamental concepts in insurance is that of moral hazard. Whenever a party is insulated from the adverse consequences of his actions, he will tend to engage in more risky behavior than he would do otherwise.
We see aspects of moral hazard around us every day. Politicians make public spending decisions based on information that is much less than they would require for their personal spending decisions, since the money does not belong to them. Investment advisors push stocks on their customers that they would never buy themselves, because they're too risky. Drivers talk on cell phones and text while driving, knowing that any resulting accident will be covered by insurance.
As Iceland's economic collapse has unraveled, it has become clear that many of the current problems now facing Icelanders are the result of moral hazards present in traditional Iceland culture, amplified by the neo-liberal philosophy that dominated our politics until the banks failed in late 2008. Until the conditions that permitted individuals and commercial entities to avoid personal liability for their errors are eliminated, we will be doomed to endless cycles of boom and bust.
Because of its small size (Iceland's population is currently around 310,000), there has always been a very close link between the elite and the dispensation of justice. During the time of the sagas, the goði (chieftains) were not only the wealthiest individuals, but they controlled their warriors and served as the judges at the annual meeting of clans in Þingvellir. Disputes were resolved as much by the force as by any agreed-upon law.
Our colonial overlords maintained a similar system, in which they used their monopolies over commerce and the use of force to ensure that justice favored the colonizers, rather than the natives. When we finally achieved our independence from Denmark in 1944, the families that had grown fat under foreign rule were the only ones with the experience or wealth required to build a modern state.
They maintained a stranglehold on all aspects of Icelandic society--media, fishing, banking, commerce, travel, politics--until they were forced to broaden their numbers as more Icelanders earned university educations and obtained commercial experience, and as the working classes exercised their new-found right to vote, but they ceded control reluctantly, step-by-step.
The new members of Iceland's elite included a group of young libertarian ideologues, led by Davíð Oddsson, Geir H. Haarde and Hannes Hólmsteinn Gissurarson, who took control of the dominant Independence Party and made Iceland into testing ground for the free market ideas of Friedrich Hayek, James M. Buchanan and Milton Friedman. Taxes were slashed and public resources were privatized.
Unfortunately, the privatization process was highly politicized, and the fisheries and the banks ended up in the hands of the ruling parties' patrons, generally for free or for greatly reduced prices. The banks immediately financed a massive spending spree that regulators had neither the expertise nor the resources to effectively oversee.
Not to worry, said the government, the market will regulate itself, and if worse comes to worst, the Central Bank will be there.
If the government had awarded these valuable resources in public sales to the best qualified parties, maybe. However, there was a fundamental imbalance of information. The government did not have the means or the will to conduct a fair sale; it had no way of knowing whether one bidder was better qualified than another. All the politicians knew was that their friends wanted the banks, and would spread some of the wealth their way.
The Icelandic public was largely left out of the decision-making process. There was no transparency: independent expert assessments of the ability of the new owners and their plans were never made public (if they were ever conducted). Politicians were never asked to report family ties to the banks, and were never required to recuse themselves from voting on measures that benefitted them personally.
The beneficiaries of the state's largesse created extremely elaborate corporate structures to mask control and to shield themselves from potential personal liability. Until Merrill Lynch went public in 1971, investment banks were private partnerships in which each partners was personally liable for any losses caused by the partnership. These partnerships' transformation into public corporations was the single most important factor in the banks' risk-taking behavior in the 2000s. As Daniel Gross recently wrote in Slate, "The shift to public ownership ... replaced the accountability of partnerships--when there are no profits, there are no partner bonuses--with the dangerous fecklessness of public boards."
In a partnership, it was in the partners' interest to ensure that junior employees did not take excessive risk. However, as Jón Daníelsson and Con Keating observe, "When proprietary trading forms a significant share of total profits in limited liability institutions, it impedes effective risk monitoring as senior management generally does not have the appropriate incentives to restrict risk-taking activities."
When the banks failed, the shareholders were wiped out, but the employees and officers who had been paid outrageous salaries and unconscionable bonuses did not have to return them, even though the collapse was the direct result of their ineptitude. If the banks had been private entities, it would have been the partners who would have been wiped out.
What is especially disheartening in Iceland is that, not only did the banks' leaders get to retain their compensation; they continue to draw salaries from their new positions of authority in the new banks and in the government, at a time when most Icelanders are being buffeted on all sides by inflation, debt, and unemployment.
Now that the bankers see that their risk-taking did not cause them any personal damage, what chance is there that they will modify their behavior?
Moral hazard also distorts other aspects of the banks' decision-making.
Iceland's Central Bank created moral hazard by implicitly promising to act as the lender of last resort for the banks as they expanded to about ten times the size of the entire domestic economy. To minimize the danger of excessive risk-taking the Central Bank should have closely regulated and supervised the banks, but it was singularly incapable of doing so.
For one thing, the office was seen as a political position. Davíð Oddsson, who had orchestrated the privatization of the banks when he was Prime Minister, had appointed himself as head of the Central Bank, despite his lack of training or experience (he considers himself to be a poet). For another, the high interest rates maintained by the Central Bank in an unsuccessful attempt to control inflation led numerous consumers to take out foreign loans and encouraged massive foreign speculation, apparently to the tune of 50% of GDP. Finally, the Central Bank made no real effort to acquire foreign reserves to prevent the exchange rate appreciation and to prepare for any crisis.
Before the collapse, the banks had every incentive to take crazy risks. The Central Bank did not impose any discipline, but pretended to be a backstop if some pitches were wild. The bubble's inflationary period led to extravagance and decadence that would have shamed Caligula. The Icelanders saw themselves as innately superior businessmen destined to lord over Europe, just as Europe had lorded over Iceland for so long. They weren't tied down by archaic concepts, such as generally accepted accounting principles (GAAP), independent boards, or lending standards, and could be more nimble in seizing opportunities.
Of course, gravity never goes away, and, as Daníelsson has noted, "If the banks become too big to save, their failure becomes a self-fulfilling prophecy." The banks' sheer size relative to Iceland's economy and Central Bank inevitably pulled them down to size.
One consequence of this imbalance is that the Icelandic state has itself become the ultimate insurer of the banks' losses. The IceSave matter that currently dominates domestic debate is a direct result of Landsbanki's desperate attempt to raise capital once its liquidity had evaporated, and some intemperate remarks from Oddsson and Haarde to British authorities.
Rather than swallowing this bitter pill, it appears that the coming national referendum will reject the compromise hammered out by the current government. There are many voices telling Icelandic voters that they have no obligation to reimburse the British and Dutch depositors under international law, that others are primarily to blame (the depositors should have known better, the British and the Dutch should have regulated Landsbanki better, etc.), that they can walk away with impunity.
Most likely, though, the British and the Dutch recognize the moral hazard in letting Iceland off the hook. If a country is unable or unwilling to create institutions capable of regulating complex international transactions or to punish individuals who take outsized risks, then the country itself must suffer, or other countries will duplicate its behavior. If you forgive Iceland, why not Spain, Greece, Ireland, the Baltic States, and all the other countries currently going through economic hell. How can you expect them to forgive Iceland when Iceland has done nothing to punish the individuals who furthered the IceSave fraud? And how would you force them to adopt and enforce prudent banking regulations if there is no downside?
In Iceland's case, reforms that would be necessary to ensure a return to the global economy must include much tighter control of the banks by knowledgeable independent regulators and directors, which will almost certainly have to be foreign. Elimination of the corporate form for investment banks would ensure much more prudent lending standards. Increased transparency is called for throughout our government, but especially here.
Unfortunately, the party just plays on. The individuals and institutions responsible for the kreppa keep giving one another second and third and fourth chances. For example, when Arion Banki (the former Kaupþing) recently decided to list the reorganized retail chain Hagar on the Reykjavik stock exchange as a public listed company, it insisted that the company's founder, Jóhannes Jónsson, keep ten percent of the stock and remain as chairman of the board. Never mind that Jónsson and his son, Jón Ásgeir Jóhannesson, represented the paradigm of the Icelandic irresponsibility. Never mind that Arion is looking to sell 85% of the company's stock without giving investors control over its direction. Never mind that there are, in Iceland, competent, responsible, experienced businessmen with records of running their companies in a financially prudent manner who could have been brought in.
The former Landsbanki employee responsible for marketing the IceSave accounts, Erla Ósk Ásgeirsdóttir, was recently given a seat in Iceland's parliament--the Althingi--by the Independence Party. Since the IP is currently the single most popular political party in Iceland, despite its central role in the financial bubble, it is very possible that she will be setting policy for the country in short order.
Until Iceland makes serious structural changes, and demonstrates to the world that it can punish incompetent and crooked individuals, it is simply not realistic to expect mercy. Icelanders have succumbed to every moral hazard that has come our way, and we cannot expect to be asked to rejoin the global economic community until we accept responsibility in a demonstrable fashion.
Icelanders Head for London for New Icesave Talks
15/02/2010 | 11:35
Icelanders Head for London for New Icesave Talks
A five-person Icelandic negotiation committee chaired by American lawyer Lee C. Buchheit is leaving for London today to discuss a new agreement on the Icesave loans with their negotiating partners, the British and Dutch governments.
According to Fréttabladid's sources, in addition to Buchheit, undersecretary of the Finance Ministry Gudmundur Árnason, undersecretary of the Foreign Minister Einar Gunnarsson and Supreme Court lawyers Jóhannes Karl Sveinsson and Lárus Blöndal have seats on the committee. However, that has not been confirmed by the government.
At the meeting in London, the Icelandic committee will formally present a new negotiating frame to the British and Dutch committees, which has been agreed upon by the Icelandic government and opposition.
The main issues of the framework have been introduced to British and Dutch officials and they agreed to resume negotiations on its basis.
Icesave talks to reopen next week
Icesave talks to reopen next week
Posted on12 February 2010. Tags: britain, Holland, Iceland, Icesave, netherlands, UK, United Kingdom
icesave1-03923942The Icelandic government intends to propose paying no interest on its Icesave debt.
According to RUV, the Icelandic government could save around ISK 130 billion if interest on the Icesave debt is removed from the total bill at negotiations with the Dutch and British authorities, which start next week.
Instead of interest payments, the Icelandic government will propose quicker payouts to the Netherlands and the UK from the bankrupt estate of Landsbanki with any excess debt remaining then being insured by sovereign guarantee.
Details on the renegotiations and Iceland's offer are very vague and Finance Minister Steingrimur J. Sigfusson gave away very little when asked by media – but it has been confirmed that talks on the Icesave issue will take place soon and that the Icelandic delegation will be led by the American lawyer Lee Buchheit.
Sigfusson said he expects talks to take place next week; reiterating that everybody on all sides wants a speedy and fair solution to the impasse.
Hector Sants leaving FSA
Morning Line: Hector Sants jumps before Tories swoop
By Chris Marshall | 10:42:42 | 09 February 2010
Despite the volatility miring his reign, and the lingering questions about the FSA's performance during the financial crisis under his leadership - some of which was certainly owing to a legacy of lax regulation when he took over - his future is assured. He has huge experience of both regulation and investment banking - indeed it was the City where he probably felt most comfortable. The question now moves onto what this means for the FSA.
Sants said in an FSA statement that he had always planned to leave after three years. But this is the wrong time to announce his departure. It's too soon when markets are in such disarray and bank reform is still up in the air. Global banking coordination is still a long was off and departure of the head of the authority meant to be in charge of banks' actions in one of the most important financial centres in the world will only put this back.
President of Dutch Central Bank Says Iceland Lied
Iceland Review Online 04/02/2010 | 14:58
President of Dutch Central Bank Says Iceland Lied
President of the Dutch Central Bank Nout Wellink said before a committee investigating the global financial crisis at the Dutch parliament today that Icelandic authorities had lied about the situation of the Icelandic banking system in the autumn of 2008.
The Government Offices of Iceland. Photo by Páll Stefánsson.
Another Dutch central banker, Arnold Schilder, who is former head of the bank's inner supervision, told the committee earlier this week that Icelandic authorities had lied about Icesave, Landsbanki's online savings unit in the UK and the Netherlands, saying that everything was fine.
According to Reuters, Wellink said he had spoken with the supervisor of the Icelandic Central Bank in early September 2008. He was told that the Central Bank had warned the Icelandic government six months earlier about possible risks involving the Icelandic banks.
"I've been hoping for a long time that they just didn't see it, but to be honest after the words of my colleague that it was several months before that he had warned them, I thought they have lied to us," Wellink said.
The Icelandic government has yet to respond to Wellink's claims, but on Wednesday, after Schilder accused Iceland of lying, the government issued a statement. "We take such allegations very seriously," Economic Affairs Minister Gylfi Magnússon said.
"One of the tasks before us is to understand whether false or misleading information was presented by the Icelandic banks, regulators and government officials to foreign regulatory agencies in the months leading up to the collapse of the banking system in October 2008," the minister explained.
President of Dutch Central Bank Says Iceland Lied
A relevant and interesting link but it begs the question of the Dutch Central Bank as to which Bank didn't lie in the autumn of 2008.
The problem we have is : They are all lying.
And this isn't a trivial problem, because they will all back each other up.
Finally we are getting to the nub of the problem.
Yes I can see this 'analysis' seems a little extreme. But take some time, reader ,to think about how you can fit the pieces together without this 'key'.
The IoMG, and Bell in particular, Aspden as well for all his intellectual incompetence, etc.etc. reacted to exactly this situation. Now how do you deal with such shower of liars? And I'm not being facetious.
The answer is precision attack. Which is what I said almost a year ago I think.
Now how can we bring the those that we voted to represent us on the CoI into the fold??? A difficult question. The bureaurocratic (spelling -- too long in ConoSur!) shortfall in the administrative/judicial processes here is obvious. And they hide behind it. But any passing reader, the normal passing reader, will by now be aware that we seem unable to control those that apparently we chose to represent us. We need to CONFRONT them.
What the hell are they doing??? Everything is a joke here. People may laugh at me... but tell me do they have a better analysis? I don't think so.
Yes to some it is a joke. It is your decision..
IMF loan to Iceland blocked by Dutch and British
There are several articles, in Ice News, which are interesting including the headlines:
More Members of Parliament against the Icesave deal
IMF loan to Iceland blocked by Dutch and British
Icelandic economy: making sense of the unintelligible
British and Dutch stance on Icesave hardening
Unbowed Icelandic PM sends a strong message to UK
You can read each of these articles if you go to the following link:
Follow the links in the box, with tab "Popular" to read the articles.
Iceland in talks with UK, Dutch officials again
- 29 Jan 2010
- London Evening Standard (West End Final A)
Iceland in talks with UK, Dutch officials
ICELANDIC, British and Dutch officials met in The Hague today to discuss compensation for funds lost when Iceland's banking system collapsed. Iceland is trying to avoid a referendum over the $5.7 billion (£3.5 billion) it owes Britain and the Netherlands for money they used to compensate their depositors in Icesave, an internet bank which collapsed with its parent Landsbanki in October 2008.
Printed and distributed by NewpaperDirect | www.newspaperdirect.com, US/Can: 1.877.980.4040, Intern: 800.6364.6364 | Copyright and protected by applicable law.
Icelandic Politicians at Icesave Meeting in The Hague
Iceland Review Online http://icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_i...
29/01/2010 | 11:40
Icelandic Politicians at Icesave Meeting in The Hague
Three Icelandic politicians, including Finance Minister Steingrímur J. Sigfússon, traveled to the Netherlands yesterday to discuss the situation of the Icesave agreement with representatives of the British and Dutch governments at a meeting in The Hague.
Minister of Finance Steingrímur J. Sigfússon. Photo by Páll Kjartansson.
Sigfússon represents the Icelandic government and his traveling companions, Independence Party chair Bjarni Benediktsson and Progressive Party chair Sigmundur Davíd Gunnlaugsson, the opposition, Fréttabladid reports.
They will meet with the Dutch Finance Minister Wouter Bos and Paul Myners, the Financial Services Secretary in the HM Treasury today.
The meeting is not held to negotiate on Icesave but rather to see whether there is reason to launch renegotiations. Also, this is a chance to establish direct contact between the opposition in Iceland's parliament and British and Dutch authorities.
The attendees of the meeting will release a joint press release once discussions have been completed.
In Iceland, the Althingi parliament will reconvene at noon today for the first time since the Christmas break, except for a few days after the president vetoed the Icesave legislation on January 5.
Thank you Glen for all you
Thank you Glen for all you are doing
Journalist's view - Iceland's President Is No Hero
Huffington Post
Iris Erlingsdottir
Icelandic journalist and writer
Posted: January 7, 2010 02:29 AM
Iceland's President Is No Hero
Read More: Alistair Darling, David Oddsson, Holland, Iceland, Iceland Bank Crisis, Iceland Bankrupt, Iceland Banks, Iceland Economic Crisis, Iceland Economy, Iceland Economy Collapse, Iceland Financial Crisis, Iceland Global Economic Crisis, Iceland National Bankruptcy, Icesave, Imf, IMF Bailout, Lehman Brothers, Lehman Brothers Bankruptcy, Libertarian, Olafur Ragnar Grimsson, Olafur-Ragnar-Grimsson, World News
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Comments 7
Since Iceland's president, Ólafur Ragnar Grimsson, announced his refusal to sign the IceSave compromise worked out December 30, 2009, many at home and abroad have held him up as some sort of hero standing up to heartless bankers and fighting injustice in the capitalist system. Unfortunately, Ólafur Ragnar is merely protecting his Icelandic oligarch friends against actions by the British and Dutch authorities to recoup funds lost by depositors -- individuals, pension funds, municipalities -- in their countries as a result of the fraud and incompetence of Icelandic regulators and bankers.
"Look at me! Look what I can do!" Political cartoonist Halldór Baldursson's take on Ólafur Ragnar's veto. mbl.is
Here are the facts:
After the conservative Independence Party implemented its libertarian policies, the Icelandic banks were privatized and underwent an explosive expansion in the 2000s. They accomplished this by leveraging saving accounts and pension funds in Iceland, taking huge loans that they then relent themselves to acquire foreign banks and other assets and created fake capital by trading assets amongst themselves at inflated values (as one expert described Icelandic banking: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets).
The sudden presence of vast sums of money quickly corrupted the political and regulatory systems, and the Icelandic regulators did not examine the banks' business practices in great detail, but rather served as facilitators, and the politicians -- including Ólafur Ragnar -- served as cheerleaders.
Although several reputable experts had warned that the banks' finances were on questionable footing, the void behind their facades did not become evident to all until Lehman Brothers' collapse in 2008. Once Landsbanki became aware that its collapse was imminent, it attempted to move depositors' funds from the United Kingdom and the Netherlands to Iceland in order to cover its domestic depositors. After Iceland's finance minister, Árni Mathiesen, bluntly told Alistair Darling that Iceland would only provide depository insurance for depositors in Iceland, the British froze Landsbanki's British branches and insisted that the Icelandic government honor its commitment under the EEA treaty to treat their citizens on an equal basis.
The British and Dutch governments then approached the Icelandic government and offered to lend it the money needed to pay the British and Dutch depositors the amounts called for by the EEA treaty. Although Iceland initially refused, it eventually agreed to these terms when it became obvious that nobody was going to deal with them until the matter was resolved. Iceland's parliament -- the Alþingi -- passed a bill approving the deal in August 2009 but added provisions limiting the amount it would pay in a given year and calling for the loan to be written off if it was not paid off in twenty years.
The bill that Alþingi passed last week was the result of lengthy negotiations with the British and the Dutch. Nobody wanted to pay the money which represented 40% of Iceland's GDP and was desperately needed at home, but the ruling left-center coalition determined that the alternative would be worse. Ironically, the Independence Party MPs adamantly opposed the deal, even though their party was primarily responsible for this mess in the first place.
While Icelandic legislators were trying to hammer out a deal that would keep the country from being labeled a pariah state by the IMF and ratings agencies, Ólafur Ragnar never uttered a peep about rejecting the bill. The Icelandic president is essentially a figurehead, and the constitutional power of veto had been used only once in the history of the republic. No one in Alþingi had any reason to suspect that he would not sign the bill.
If the referendum on IceSave results in the bill's rejection, there will be a strong pressure on the government to resign and call for new elections. Given the Tea Party mood in the country these days, this will almost certainly place the conservative parties back into power.
The movement to reject the IceSave bill was largely demagogic politics by the former ruling conservative coalition. Is it any coincidence that the petition presented to Ólafur Ragnar asking him to veto was the work of Magnús Árni Skúlason, a former Progressive Party board member who was forced to resign from the Central Bank after it became known that he was aiding and abetting violations of the country's currency laws? Is it any wonder that the current head of the Independence Party has done a 180 degree turn on his position on IceSave? Should we be surprised that many former Independence Party supporters and sponsors are expected to be indicted soon for their roles in the fraud underlying Iceland's burst bubble? Does it stretch the limits of credulity to discover that Ólafur Ragnar himself became very close to the oligarchs who profited from the banks?
It would have been courageous for Ólafur Ragnar to have called on the banks to rectify the weaknesses identified by Danske Bank in 2006. It would have been courageous for him to have denounced the Icelandic public's unsustainable consumerism. It would have been courageous for him to have questioned the "irrational exuberance" of his banker friends instead of cheerleading their orgy of conspicuous consumption. It would have been (at least somewhat) courageous for him to have spoken up against Alþingi's proposed course before reading opinion polls and receiving the petition.
This is not courageous. Telling ordinary depositors in foreign countries that they were fools to have trusted Icelandic bankers is not courageous.
At this point, we can only hope that the politicians who pushed the IceSave bill through will take to the airwaves to convince the Icelandic people that, although they may not like paying their debts, the consequences of not doing so would be much worse. Although the August IceSave bill remains in effect, it is extremely doubtful that the UK and the Netherlands will accept its terms and permit the IMF to release badly-needed funds to Iceland.
The full consequences of the president's decision have yet to be felt, but two of the three rating agencies immediately lowered Iceland's sovereign ratings to junk bond status, and the third will probably do so soon. Certainly, Iceland will not be allowed into the EU until this is resolved, and they may be booted from the EEA.
The history behind Iceland's fall is already being rewritten, with the architect of the whole Icelandic money mirage and chair of the Central Bank during the relevant period -- Davíð Oddsson -- now serving as the editor in chief of the country's largest newspaper.
Iceland must focus on rebuilding its reputation as a trustworthy business and diplomatic partner in the community of nations and direct its energies on resolving the issues vital to its survival as a democracy: abroad by repairing our relations with the world community and the nations hurt by the crimes of our financial and economic elite, and at home by thoroughly investigating, prosecuting and punishing the criminals.
If the criminal and regulatory investigations currently underway are not completed, the individuals responsible for nearly destroying their country may be exonerated; the whole sorry mess will be whitewashed, and any lessons we might draw from this painful experience will go down the drain -- along with any hopes of a functional, just democracy.
Follow Iris Erlingsdottir on Twitter: www.twitter.com/elluskott
* Iceland
* Lehman Brothers
Related News On Huffington Post:
Iceland talking Icesave mediators though NL/UK still say no to n
Iceland talking Icesave mediators though NL/UK still say no to new deal talks
Ice News - By Alex on Jan 16, 2010 in Denmark, Finance and Business, Finland, Holland, Iceland, International, MBL, Norway, Politics, Scandinavia, Sweden, United Kingdom, United States
suicideMPs from the smallest party in Iceland's parliament say that they are against any future neutral mediator in the Icesave issue coming from a Scandinavian country. They told media that they cannot support an intermediary who comes from a country which has put so much political pressure on Iceland to obey the wishes of the Netherlands and the UK.
It remains possible that the Icesave issue will be renegotiated between Iceland and the Netherlands and UK. The Icelandic government has been meeting with opposition leaders in an attempt to hammer out a joint position on the matter, as well as working out what the contract would look like in an ideal world, if agreed on by all Icelandic political parties.
If the contract does end up being renegotiated, pressure and enthusiasm are mounting for the idea of bringing in a neutral mediator from an unconnected country to steer the talks.
Left Green MP Lilja Mosesdottir has, for example, stated her preference for Joschka Fischer, the former German Foreign Minister to be offered the role.
Birgita Jonsdottir, an MP for The Movement (formerly the Citizens' Movement) says the parties involved should look to France or even the USA; but that Iceland should resist the idea of a mediator from Denmark, Finland, Norway or Sweden. "We ask that he or she not come from Scandinavia. The same countries which have been putting the thumb screw on us over the Icesave issue," she said.
Iceland talking Icesave mediators though NL/UK still say no to n
Iceland talking Icesave mediators though NL/UK still say no to new deal talks
Ice News - By Alex on Jan 16, 2010 in Denmark, Finance and Business, Finland, Holland, Iceland, International, MBL, Norway, Politics, Scandinavia, Sweden, United Kingdom, United States
suicideMPs from the smallest party in Iceland's parliament say that they are against any future neutral mediator in the Icesave issue coming from a Scandinavian country. They told media that they cannot support an intermediary who comes from a country which has put so much political pressure on Iceland to obey the wishes of the Netherlands and the UK.
It remains possible that the Icesave issue will be renegotiated between Iceland and the Netherlands and UK. The Icelandic government has been meeting with opposition leaders in an attempt to hammer out a joint position on the matter, as well as working out what the contract would look like in an ideal world, if agreed on by all Icelandic political parties.
If the contract does end up being renegotiated, pressure and enthusiasm are mounting for the idea of bringing in a neutral mediator from an unconnected country to steer the talks.
Left Green MP Lilja Mosesdottir has, for example, stated her preference for Joschka Fischer, the former German Foreign Minister to be offered the role.
Birgita Jonsdottir, an MP for The Movement (formerly the Citizens' Movement) says the parties involved should look to France or even the USA; but that Iceland should resist the idea of a mediator from Denmark, Finland, Norway or Sweden. "We ask that he or she not come from Scandinavia. The same countries which have been putting the thumb screw on us over the Icesave issue," she said.
Sweden will wait for IMF before lending to Iceland
Ice News, Jan 16, 2010:
Sweden will wait for IMF before lending to Iceland
By Alex on Jan 16, 2010 in Iceland, International, MBL, Politics, Scandinavia
fredrik-reinfeldtThe Swedish Prime Minister Fredrik Reinfeldt told Reuters this week that Sweden will not pay more of its loan to Iceland out before the successful completion of the IMF review. The IMF review has, however, been delayed again.
Reinfeldt says he has spoken directly with his Icelandic counterpart, Johanna Sigurdardottir, and informed her he believed all the other Scandinavian Prime Ministers agreed with him that Iceland should pay its foreign debts.
"We want Iceland to stand by these international debt obligations and in return, we will stands by our promises," he said.
When Visir.is asked Minister for Trade Gylfi Magnusson why the IMF looks set to delay its Iceland progress report, he said it is almost certainly due to Icesave and the delay in waiting to see what happens at the national referendum.
For Iceland's economy, Icesave casts a long shadow
Taken from Reuters: Fri Jan 15, 2010 11:01am EST
- Icesave impasse weighs on investments in Iceland
Icelandic firms without access to foreign capital
Row could delay IMF programme
By Niklas Pollard and Omar Valdimarsson
REYKJAVIK, Jan 15 (Reuters) - Eight months ago, Ulfar Eysteinsson vowed he would not shave until interest rates in Iceland fell below 10 percent.
For a while it looked like he would be breaking out his razor any day, but the "Icesave" row with Britain and the Netherlands has changed all that, raising doubts about further rate cuts from their current 11 percent.
"I just hope they won't raise interest rates. It's getting hot with all this growth," said Eysteinsson, a chef in his 60s.
Like many Icelanders, he is weary of the Icesave affair, which has clogged up Iceland's financial arteries for more than a year and which now threatens growth and IMF aid.
Icelanders are to vote by March 6 on a deal to repay money lost in Icesave accounts, which lured online savers in Britain and the Netherlands. Those governments compensated savers when the bank collapsed and now want their money back from Reykjavik.
But opinion polls show voters are likely to reject what are seen as the harsh terms of the agreement.
While ordinary Icelanders grapple with high interest rates needed to shelter the currency while the Icesave dispute is being resolved -- businesses suffer from a lack of capital.
"The basic reason why we need to have this settled is to re-open access to foreign capital markets and our access to foreign loans and financial services," Vilhjalmur Egilsson, secretary general of the Confederation of Icelandic Employers.
"The markets are essentially closed except for the loans that the government is securing."
The lack of capital is crippling investment in everything from energy to aluminium plants, while the government has been too distracted by Icesave to get on with other business.
"It's been difficult to get other things addressed and we see that on very specific bills as regards fishing policy," said Eggert Gudmundsson, chief executive of fishing and fish processing company HB Grandi.
"There is just no time to even discuss them," he said. "Partly, this has paralysed the management of the country."
Under the terms of the deal, Iceland must pay up to 4 percent of GDP growth after an initial grace period. Many Icelanders fume at the 5.55 percent interest and that Iceland would remain saddled with the debt even if it is not paid in full by 2024 as planned.
In an outlook drawn up before the president unexpectedly rejected the Icesave deal and forced a referendum, the government saw gross domestic product edging up to 1.52 trillion Icelandic crowns ($12.2 billion) this year after a dismal 2009.
But this forecast includes 282 billion crowns of private and public investment, money which is in doubt unless the Icesave dispute is cleared up, uncorking the flow of foreign capital.
"That would of course mean less economic growth, a bigger fiscal deficit, problems with the currency and certainly we would have a much harder time lifting the capital controls and easing interest rates," Economy Minister Gylfi Magnusson said.
For the moment, the only substantial foreign capital available is through an International Monetary Fund aid programme supported by Iceland's Nordic neighbours. Magnusson said this week this might be delayed due to the Icesave dispute. [nLDE60C1HW]
The $2.1 billion of IMF aid, with a further around $3 billion pledged by European countries, is vital for Iceland to be able to finance a recovery from its worst economic downturn.
"If we are going to do that through domestic savings it is clear, at least to me, that the recovery will be much more difficult, because we have households that have a big job in just rebuilding their own balance sheets," Icelandic Central Bank Chief Economist Thorarinn Petursson said.
In addition, private capital flows across the world tended to closely follow the progress of IMF programmes, he added.
"It's like a health warranty," Petursson said.
U.K. warns Iceland of pariah status
Taken from The Globe and Mail, dated 6th Jan, 2010
U.K. warns Iceland of pariah status
Iceland faces a national referendum over the economy
Says it will block the nation from joining EU after its president voted against repayment of $5.7-billion in loans to Britain and the Netherlands
See also:
* In crisis, Iceland faces renewed turmoil
* Iceland assembly to reconvene
* Iceland rejects compensation bill
* Article
* Comments
Jane Wardell
London — The Associated Press Published on Wednesday, Jan. 06, 2010 6:51AM EST Last updated on Thursday, Jan. 07, 2010 8:37AM EST
Britain warned Iceland on Wednesday that it could be blocked from joining the European Union after the tiny North Atlantic nation's president voted against the repayment of $5.7-billion in loans to Britain and the Netherlands.
Icelandic President Olafur R. Grimsson's decision Tuesday not to sign into law a bill on the loans caught many by surprise and threatens to damage Iceland's international standing as it attempts to recover from financial collapse.
International credit ratings agency Fitch slashed Iceland's credit rating to junk status, while Standard and Poor's has put Icelandic debt under negative credit watch.
Mr. Grimsson said Tuesday the matter would be decided in a referendum among Iceland's voters, where opposition is so strong to the bill that many fear a "no" vote that would overturn the bill's narrow passage through parliament last month.
A draft bill on the referendum, to be put before the Icelandic Parliament on Friday, gives Feb. 20 as the tentative date for the poll.
The legislation would have repaid the British and Dutch governments for the funds they have already paid out to their citizens who lost money when Internet bank Icesave, a subsidiary of Icelandic bank Landsbanki that was available only in Britain and the Netherlands, collapsed.
The savings of Iceland's own citizens were protected from the collapse of its banking sector in October 2008 by an unlimited domestic deposit guarantee.
British Financial Services Minister Paul Myners said that Iceland risked pariah status if the country's 243,000-strong electorate votes "no."
"The U.K. government stepped in to ensure that all retail depositors with Icesave were fully paid out, and now we expect the Icelandic Government to ensure that we are repaid that amount which Iceland owes us," Mr. Myners was quoted as saying in The Times newspaper.
Mr. Myner said that Iceland was fully aware that it would sacrifice any relationship with the International Monetary Fund and possible entry to the EU if it failed to repay the money.
"I don't think it's a case of us having to warn them," he said. "The Icelandic government recognized that this was the case."
Under European Economic Area rules, a nation must insure its own banking deposits outside its borders before it can join the EU. Britain and the Netherlands also have the power to veto the EU's application, which was made formally last month.
Icelandic Finance Minister Steingrimur Sigfusson said late Tuesday that he had spoken with Dutch Finance Minister Wouter Bos.
"He was of course very disappointed and shocked and told me the discussion in the Netherlands was uneasy and at times strong," Mr. Sigfusson said. "We agreed to try rather to steady the waters and try and calm things down."
Mr. Grimsson vetoed the legislation after receiving a petition signed by a quarter of Iceland's population of 320,000.
Iceland says IMF aid likely delayed
Taken from The Globe and Mail, dated 13th January, 2010
Iceland says IMF aid likely delayed
Economy minister feels nation is 'very far' from solving Icesave dispute without referendum
* Iceland tries to avoid referendum, settle with Britain, Netherlands
* Iceland assembly to reconvene
* U.K. warns Iceland of pariah status
Niklas Pollard
Reykjavik — Reuters Published on Wednesday, Jan. 13, 2010 10:08AM EST
Iceland's economy minister said on Wednesday there were signs an IMF-led aid package would be delayed after a hitch in a deal to repay Britain and the Netherlands money lost in the island's banking collapse.
Economy Minister Gylfi Magnusson said the centre-left government was "very far" from a solution which could lead to a new repayment deal and allow the government to cancel a planned referendum in Iceland on the issue.
"Obviously the Icelandic government is trying everything it can to prevent a delay (to the IMF program), but I think the odds are against us," Mr. Magnusson said in a Reuters interview, pointing to delays last year due to the drawn-out dispute.
"And unfortunately there are indications that something like that might happen again now."
An agreement with the two European Union countries is seen as key for the continued flow of aid to Iceland to underpin an economic recovery from a deep recession after its main banks all collapsed in the space of a week in 2008.
"If the delay is only a few weeks that is not really material but if it is delayed by several months that would be very bad news indeed," Mr. Magnusson said.
Mr. Magnusson said payments being put on hold under the North Atlantic island nation's $10-billion program, tailored by the International Monetary Fund, could dent investment and growth while creating the need for further fiscal austerity.
"If we have a larger contraction of the economy than projected that will hit government through the fiscal side as well, so probably we might need some additional belt-tightening," he said.
Government finances are in tatters after the collapse of the banking system and there are already plans to cut expenditure by around 43 billion crowns ($345.8-million) this year to 546 billion Iceland crowns ($4.39-billion).
Britain and the Netherlands compensated savers who had invested more than $5-billion in high-interest Icelandic savings accounts when the country's banking system collapsed. The two EU countries have insisted that Iceland foot that bill.
The issue held up initial payments from the IMF program last year and Magnusson believes a further delay of aid would make the lifting of capital controls imposed to shelter the shattered currency and further rate cuts much more difficult.
It would also continue to hamper the ability of Icelandic firms to return to international capital markets, he said.
"If that doesn't happen for a few weeks or months, we can certainly live with that. But we couldn't continue for more years without re-establishing access to those channels."
Reykjavik applied last year to start talks with Brussels on joining the EU in the hope of a fast-track approval and eventual euro membership, and many observers believe there is a risk that the impasse could slow its bid to join the 27-member bloc.
That is despite reassurances from the EU presidency that the Icesave dispute and Iceland's application would be viewed as separate issues.
Icelanders are due to vote in late February or early March on a deal struck between their government and Britain and the Netherlands after the president last week unexpectedly refused to sign an amended bill on repayment, forcing a referendum.
Many Icelanders are furious at having been landed with the tab for the mistakes of their free-wheeling banks and the latest opinion poll shows six out of 10 opposed to the bill enshrining the deal struck with Iceland's larger European neighbours.
The government has embarked on a last-ditch attempt to avoid a vote by seeking to secure more palatable terms.
"We are very far from solving this problem by finding some bright new solution or a quick fix that means that we don't need a referendum," he said.
"To be brutally honest, it is going to be an uphill battle," Mr. Magnusson said of the upcoming referendum campaign.
"I don't think that it is a foregone conclusion that the majority will say no, but the government and everybody else who is in favour will have a pretty tough job."
Many Icelanders are also worried the Icesave deal places too big a burden on the tiny island nation. The debt comes to more than $15,000 per Icelander although a sizable chunk is likely to be covered by the sale of the assets of Landsbanki, the failed bank that operated Icesave.
Mr. Magnusson said talk that Iceland could not shoulder the burden was "utter nonsense." The government's working assumption is that Landsbanki's assets will cover 75-90 per cent of the prioritized claims, nearly all of which are deposits such as Icesave.
Mr. Magnusson labelled a recovery rate of 75 per cent "a worst-case scenario".
"A more likely outcome is that the recovery is considerably higher," he said. "I actually feel that it is not unthinkable that it could go to 100 per cent."
How the Icelandic saga should end
From the Financial Times, dated 14th Jan, 2010
How the Icelandic saga should end
By Martin Wolf
Published: January 14 2010 20:24 | Last updated: January 14 2010 20:24
Iceland is famous for its sagas. But the latest one is truly dramatic: the balance sheets of its privatised financial sector grew from twice to 10 times gross domestic product, in five years. In the absence of a lender of last resort, this story had to end badly. In the panic of 2008, it did.
Because Iceland was a member of the European Economic Area, its banks were allowed to set up branches freely. To raise money, Landsbanki, one of Iceland's now collapsed banks, set up an internet bank, Icesave, which gulled depositors by offering attractive interest rates. Under the European Union directive, Iceland also had an obligation to establish a deposit insurance scheme, which it did, through a levy on those banks.
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Then came the collapse. Some Icelanders blame Gordon Brown, Britain's prime minister, for pulling the plug on their banks. That is unreasonable. Competent observers had long concluded that the financial system was a house of cards. It was sure to collapse in a panic. Less unreasonable is the complaint over the UK's use of a section of its anti-terrorism laws to freeze assets. But some such action was justified.
Since the banks had turned Iceland into a hedge fund, with massive short-term foreign currency liabilities used to finance risky long-term assets, the economy was doomed. According to the September 2009 economic survey by the Organisation for Economic Co-operation and Development, between 2007 and 2010 the fall in real consumption will be close to a quarter and that of domestic final demand almost 30 per cent. This is a depression. The burden of debt and loss of purchasing power are worsened by the collapse of the krona, which has lost more than half its value against the euro since July 2007.
So far, so bad. But, for ordinary Icelanders, it gets even worse. The British and Dutch governments take the view that the taxpayers of Iceland have a duty to refund the amount promised by Iceland's collapsed deposit insurance fund. The total claimed by the UK is £2.35bn and by both countries together €3.9bn. The latter is now some 50 per cent of Iceland's shrunken GDP. In the UK context, this would be equivalent to a demand for £700bn. It is not hard to imagine how far Mr Brown would get with a suggestion that the UK should accept such a debt to refund depositors in foreign branches of bankrupt UK banks.
This, then, is the background to the decision by Olafur Ragnar Grimsson, Iceland's president, to put the latest version of an agreement negotiated under duress to a referendum. Lord Myners, the UK's City minister, has stated that if the Icelandic people were to reject the deal, they would "effectively be saying that Iceland does not want to be part of the international financial system". After their recent painful experiences, Icelanders may wonder why that is so worthwhile. But without agreement to repay, a $10bn rescue plan funded by the International Monetary Fund and Nordic countries is now in doubt.
So do the ordinary Icelandic taxpayers have a legal obligation to meet the liabilities of their collapsed deposit insurance fund? The answer to that is, to say the very least, that it seems to be very far from evident. Moreover, any British or Dutch depositors who thought their money was safe because the government of Iceland guaranteed it were mad.
Do Iceland's taxpayers have a moral obligation to pay this loan? My view is: no. The delusion that finance was the path to riches was propounded by countries that should have known far better. I cannot blame Icelanders for succumbing. I certainly do not want generations of Icelanders to bear the cost.
The final and, in truth, most important question is whether these demands are reasonable. After all, in every civilised country it has long been accepted that there is a limit to the pursuit of any debts. That is why we have introduced limited liability and abolished debtors' prisons. Asking a people to transfer as much as 50 per cent of GDP, plus interest, via a sustained current account surplus is extraordinarily onerous.
Against this, the UK government argues that it is offering a lengthy grace period and an interest rate that is close to the cost of funding for the UK Treasury. It also argues that as much as 90 per cent of the repayment it seeks could come from liquidation of Landsbanki's assets.
Yet the obvious answer to the latter point is this: if the assets of the bank are that valuable, why not write off the debt, in return for the claims on these assets? That would be a generous gesture. It is, more importantly, one that would do much to improve the morale of a battered and vulnerable little country. Threatening such a country with destruction, as Lord Myners has done, is simply shameful. The UK and the Netherlands should stop this self-righteous bullying at once.
Yet they – and everybody else – must learn the really big lesson here. The combination of cross-border banking with generous guarantees to creditors is unsustainable. Taxpayers cannot be expected to write open-ended insurance on the foreign activities of their banks. It is bad enough to have to do so at home.
I have just sent this to Martin Wolf of the FT
martin [dot] wolf(?)ft [dot] com
Dear Sir
As one who actuually has money at stake through the ill considered expansion of Icelandic banks, perhaps I could add a few comments to your article. I notice for instance that the general tone is the the perpetrators are innocent and the victims fools. Of course that's an attitude that you can afford to take, I can't. You may wish to know that of the fools that I know of there has been one suicide, a marrige breakdown amd a nervous breakdown.
Now for your benefit there are a few salient points I'd like you to consider. Whatever the law actually says, the reality is that as an expat working overseas I had to use an offshore bank because UK banks interpret the Money Laundering Laws in such a way, that without a UK domestic address you can't have a UK bank account. At the time I for instance transferred the money from the sale of our home in Russia, I was far more concerned about the future of UK banks. As it happens that concern has proved to be accurate and has cost the UK tax payer upwards of £150 billion.
Secondly if the Icelandic guarantees are thrown to the wind where does that leave the Rule of Law, the Law of Contract? I'd suggest it makes the concept worthless. Basically your position is that the perpetrator of the crime is treated with sympathy and the victims and policing authorities are the ones who should be abused. In the case of Icesave in particular, why was it actually set up? To shore up the Icleandic economy by accessing the UK, Dutch and German markets perhaps?
It may well be the case that the UK regulators, the FSA and the FSC on the Isle of Man, and the Gurnsey regulators have done an appalling job here. That advise given by Tony Shearer, of the then Singer Freidlander Bank, was ignored by the FSA about the suitability of the Icelandic management to own and run a bank for insatnce. It may well be that the FSA sat and watched as Kaupthing, issued statements that a Shiekh had invested over £100 million into their bank in September 2008, when as it turns out Kaupthing actually lent the money to be reinvested in their bank! Now I for one took that as a sign that a thourough due diligence had been done first, so I transferred the money that would take my family home to an Icleandic bank. Even on the day the bank collapsed I was assured that my money was covered 100% by the guarantee. Am I supposed to be sympathetic to Iceland for ruining my and other families lives? If I made an error of judgement and have to pay the price, I see no reason why Iceland should not have to pay a price.
It may well be that Iceland is a small population, but then so is Liechenstein and I can't imagine them getting much sympathy if thier banking system collpases through stupidity and incompetance of their government and their regulators. And let's be clear the Icelandic regulators have been totally incompetent in their role. They did after all not only encourage, but backed their banks to create debts that were ten times their GDP. Surely the act of fools? The population voted those individuals in and gave them the power to act on their behalf. That's the democratic way, the social contract and accoring to the Icelandic president they are a very democratic people!
As to the concept that debt was swapped for the claims, that was in fact suggested to the Isle of Man Government in November last year by a small group of depositors in their discussions over the collpase KSF IoM, I get the impression that HMG was less than enthusiastic about the idea! Perhaps you would like to press that point further in your next article.
well said Expat
Very well said Expat
Without education, with poor health and becoming a one parent family when my son was 2. I worked hard lived prudently and by my standards made a lot of money without ripping anyone off, short changing anyone or beiing given any handouts, ie., benefits or left an inheritance. A couple of years after retirement, along came KSF and its dodgy shinanigans and snatched the lot. The whole world has become greedy, corrupt and selfish, from bankers down to the workman who repairs your house. Armageddon will not be an act of God, it will be caused by greed, corruption and dishonesty and we are well on the road towards it. We can wriggle and squirm and look for a person to blame but they are all around us.
Brilliant response
Well worded response - poignant, realistic and more comments should be made to the journlist who wrote this article (See News article if you want to send a response). Well done, expat!
Sorry to bang on about this
"Any British or Dutch depositors who thought that their money was safe because the government of Iceland guaranteed it were mad."
The point is that the British government did not at any time say that depositors' money in Icelandic Banks was not safe. Surely, they have an obligation to protect British savers. I thought that that's what the FSA was supposed to do.
They have health warnings on cigarette packets, don't they? It's the law.