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Iceland rejects debt-slavery

by IdiotSavant Mon Mar 8th, 2010 at 08:22:49 AM EST

From No Right Turn, New Zealand's liberal blog:

Iceland went to the polls yesterday in a referendum on the government's debt-repayment deal with the UK and the Netherlands - and rejected it utterly, with 93% voting against.  That's a powerful message to Iceland's international "creditors" that the Icelandic people do not regard themselves as liable for the private debts of selfish bankers - and a powerful threat to any Icelandic government who dares to think otherwise.  Icelanders have already toppled one government over the banker's bailout, and it looks like they'll be quite happy to do it again if the current government fails to properly represent their views.

The interesting question is what the UK and Netherlands will do.  They're making the usual threats of financial armageddon, but the blunt fact is that the Icelandic government simply cannot meet their demands (and if it purports to, it will be rolled and replaced with one that rejects them).  Turning the screw tighter - e.g. by repeating their 2008 abuse of anti-terrorist legislation - won't change that, and will simply harden attitudes further.  Unfortunately, acknowledging that reality would mean a loss of face, and so we're likely see a lengthy period of pointless and futile sadism, as the UK tries to squeeze blood out of a stone.

frontpaged - Nomad


Display:
Chris Cook in the Salon links to the English-language Icelandic blog Economic Disaster Area.

Looking in the recent posts there one finds things such as: The National Referendum: Not About IceSave March 4th, 2010

If you are a foreigner taking a look at the national referendum this Saturday, please don´t make the mistake of thinking it is about IceSave.

It is all about internal, Icelandic politics.

Those who will vote yes are voting for the government to stay on (Social Democrats and those who still think Steingrimur J. Sigfusson is the leader of the Left/Greens).

Those who vote no are voting for the Independence Party and the Progressive Party (People who would absolutely love for it to still be 2007).



En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Sun Mar 7th, 2010 at 06:09:15 PM EST
No Vote In IceSave Referendum (February 26th, 2010)
Of course I would say no to paying for the insane way Landsbankinn went about its business. Today, Halldor J. Kristjansson, one of their CEO's is on record saying that there were meetings in February 2008 between the banks and the government about an impending collapse, yet they continued on to open the IceSave accounts in the Netherlands two months later.

But in a discussion dominated by the frantics, Bryndis Hlodversdottir, law professor at Bifrost University has come up with the most rational input regarding the referendum so far. In order for it to be democratic the following has to apply:

...

None of these parameters are met with this ridiculous referendum. So for the first time since I was old enough to vote I will stay away from the voting booth. This farce served up by a lame-duck president and a Progressive Party pressure group called InDefence has nothing to do with democracy and I want nothing to do with it.



En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Sun Mar 7th, 2010 at 06:12:17 PM EST
[ Parent ]
National Referendum: A Sad Day For Democracy in Iceland (March 5th, 2010)
Three likely scenarios

a) The government keeps going and attempts to find a solution with the UK and Holland on the grounds that "people are against paying these debts". Why would the UK and Holland see that as an argument? Those countries can wait. The IMF loans could wait as well. The government is backed into a corner and has little options but to resign.

b)  The government keeps going and attempts to find a solution with the UK and Holland on which the opposition can agree to. Which is unlikely, because the opposition can wait until things are so tight that it can assume power on a wave of discontent.

c) The government resigns. The current opposition resumes negotiations and quickly finds an "acceptable deal" with minor adjustments which they will take credit for. The new opposition kicks up a storm. Then what? A new national referendum on that deal?

It is really a whole big mess. ...



En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Sun Mar 7th, 2010 at 06:15:56 PM EST
[ Parent ]
In other words, this has unsurprisingly become a matter of political jockeying for power, playing on the widespread anti-bailout sentiments of the Icelandic people? Is there anyone actually crafting alternative solutions to this, or are their voices being drowned out?

And the world will live as one
by Montereyan (robert at calitics dot com) on Sun Mar 7th, 2010 at 07:08:53 PM EST
[ Parent ]
Does anyone find it ironic that the UK and Netherlands are looking for bailouts because of individual decisions made by Brits and Dutch? Even while lecturing Greece in the media about looking for a handout? What of Germany accepting $20+ billion from the US taxpayer last year? I seem to recall the German gov't bank KfW made a $300 billion loan to Lehman a few hours before Lehman declared bankruptcy. Whose fault was that? And now the UK and Netherlands are threatening that Iceland will not receive an EU bid? Very rich. How very Greek.
by Upstate NY on Sun Mar 7th, 2010 at 07:43:15 PM EST
[ Parent ]
In the case of Icesave, we're talking about less than a percent of GDP for each of the UK and the Netherlands, but something like 30% of Icelandic GDP.

Of course the conduct of Landsbanki in creating and managing Icesave was unconscionable, and the Icelandic government's blanket guarantee of all of the icelandic banks' foreign liabilities foolhardy, but the UK and the Netherlands are making a lot of fuss over peanuts.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Sun Mar 7th, 2010 at 07:45:54 PM EST
[ Parent ]
The lesson is pretty clear. Gov'ts are fearful of their economic future, and this fear paradoxically feeds the economic pressure on the gov'ts since the markets sense it.  
by Upstate NY on Sun Mar 7th, 2010 at 09:09:20 PM EST
[ Parent ]
$300 million loan, not billion. Jeez.
by Upstate NY on Sun Mar 7th, 2010 at 08:57:12 PM EST
[ Parent ]
but IIRC they made a payment under a swap agreement - which they were supposed to - but might have decided not to do and wait for the bankruptcy estate to sort out later...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 8th, 2010 at 05:24:32 AM EST
[ Parent ]
Isn't that the excuse Greece and Goldman Sachs used to cook Greece's books?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 05:30:20 AM EST
[ Parent ]
in this case, the underlying transaction was, as far as I can remember, completely benign - the problem was the person who decided to send 300M into what was obviously-by-then a black hole. What I can't remember is whether that payment was an amount owed to Lehman (in which case the bankruptcy trustee would have claimed it anyway, just a bit later) or if it was some kind of drawdown (in which case the German bank would have had a legitimate reason not to let it happen once Lehman was bankrupt, and it traded good money for a one claim among a very large number of similar claim for Lehman's shrinking assets).

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 8th, 2010 at 11:08:27 AM EST
[ Parent ]
Can't we assume, however, that it was the latter since the US taxpayer had to make do on a claim that was never recovered through bankruptcy proceedings?
by Upstate NY on Mon Mar 8th, 2010 at 01:02:51 PM EST
[ Parent ]
Clearly some people there don't understand Dutch geography right...
by Nomad on Mon Mar 8th, 2010 at 08:13:09 AM EST
[ Parent ]
Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland Holland

(yes, you can actually troll-rate this comment)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 08:36:27 AM EST
[ Parent ]
Have you been at the Dutch Courage...?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon Mar 8th, 2010 at 08:43:15 AM EST
[ Parent ]
What, they want the idiots that created this mess in the first place back in power?

"The basis of optimism is sheer terror" - Oscar Wilde
by NordicStorm (m<-at->sturmbaum.net) on Mon Mar 8th, 2010 at 06:45:01 AM EST
[ Parent ]
The claim is they're being played like fools. In the end it's like the Italians voting for Berlusconi, the Thai voting for Thaksin... The Progressive Party leader (Sigmundur David Gunnlaugsson) is nothing if not media savvy (he was behind the inDefence petition) and very wealthy.

Economic Disaster Area: What Have You Done? (January 7th, 2010)

What could have been so hard to misunderstand about the InDefence petition's opening statement?
"I challenge the president of Iceland, Mr. Olafur Ragnar Grimsson to reject the new IceSave bill. I think that it is fair to demand that the economic burden imposed on the Icelandic public and the future generations of this country will be put to a national referendum where the Icelandic nation gets to vote on it."

The front page of Frettabladid also reveals an interesting turnabout. Sigmundur David Gunnlaugsson and especially Bjarni Benediktsson are now against a national referendum. They would prefer the bill to be revoked and new negotiations should take place between Iceland and the UK and Netherlands. Petur Blondal, the Independence Party MP who sponsored a bill a couple of weeks ago asking for a national referendum said yesterday that "MP's have to sponsor bills all the time which they don't necessarily agree on wholeheartedly" as he now claims that a national referendum would be less preferable to renegotiating.

(this was written shortly after the President of Iceland refused to sign the Icesave bill thereby precipitating the referendum)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 06:56:23 AM EST
[ Parent ]
How is the whole mess not the fault of the Icelanders, a result of their voting for a government that failed to adequately regulate their banks?
by asdf on Mon Mar 8th, 2010 at 12:39:18 AM EST
Now with this referendum result they're ensuring the same ("Progressive") party gets back in power.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 02:52:41 AM EST
[ Parent ]
asdf: How is the whole mess not the fault of the Icelanders, a result of their voting for a government that failed to adequately regulate their banks?

"Mjoll Snaesdottir, an Icelandic archaeologist", would agree with you.

FT.com / Europe - Icelanders confused on repayment vote

"We've been through many hardships in the past and we'll get through this one," says Mjoll Snaesdottir, an Icelandic archaeologist. She is unsure how to vote but says Icelanders cannot escape responsibility. "It was us that elected the governments that created the crisis."

Then an interesting follow-up:

Ms Snaesdottir says future archaeologists will puzzle over artefacts from early 21st-century Iceland to work out why a nation blessed with natural resources chose instead to focus on financial services.

Actually, while it's turning out badly for 318,000 humans who currently live on Iceland, focusing on financial services rather than natural resources is probably better for the planet in the long term.

The march of civilizations is a series of defenses that man has put up against the dread of pure existence.

by marco on Mon Mar 8th, 2010 at 03:45:18 AM EST
[ Parent ]
Is not banking activity in UK and the Netherlands the responsibility of the governments of said nations?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Mar 9th, 2010 at 03:56:23 AM EST
[ Parent ]

How the Icelandic saga should end
By Martin Wolf (14 January 2010)

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.

(...)

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.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 8th, 2010 at 05:27:33 AM EST
Via the Economic Disaster Area blog I found the following article by a Spanish lawyer at the University of Iceland.

Elvira Méndez Pinedo: Without social justice there is no future for Europe: Open letter to the EU institutions from Iceland (10.1.2010)

There has been an oversimplification of the responsibilities and factors which led to the financial collapse plus the attribution of debts to Icelandic sole liability. Responsibility is to be found at all levels: European/national, private/public, UK/Iceland/Holland and it has to be determined very carefully. It is essential from a social justice point of view. What Icelanders are requesting is simply to examine the nationalisation of private debt in the light of social rights, democracy, justice and rule of law promised by the Treaty of Lisbon and the EU Charter of Fundamental Rights. Without social justice there is no future for the European integration and the internal market.

...

Questions:

  • Is it fair that citizens pay the consequences of the European Union/EU/EEA Member States and private companies failures in the internal market?
  • Is it fair that the Icelandic State has to nationalise the debts risking bankrupcy and future sustainaibility in order to comply with European law and satisfy creditors under the strict surveillance of the IMF and being deprived of the legal rights under the European legal order?
  • Isn´it a basic principle of democracy: "no taxation without representation"? Should not tax-payers have a word in the economic governance of the internal market?


En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 07:11:34 AM EST
As some may already know, this has been pointed out as a very potential solution.

I can't wait. :)

by Nomad on Mon Mar 8th, 2010 at 08:16:49 AM EST


The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Mon Mar 8th, 2010 at 08:23:08 AM EST
[ Parent ]
EU anytime soon.... that's really the only practical outcome of this given the small amounts being talked about. (Of course, their are considerations of principle as well...)

Monetary union with Norway? Not like their own currency will be worth much anytime soon. Who'll take it? I'd rather take payment in lamb chops and herring than their worthless crowns.

Wonder how much pull the UK and NL have at the IMF...good luck getting the next bailout, Icelanders....

I'd understand all this if Icelanders would express a little contrition and recognition of the mess they've created (small as it thankfully was) rather than turning back to the same greedy assholes whose lack of oversight and full-throated neo-liberal bullshit support brought this mess in the first place. They drank the kool-aid...for a while it looked like they were sobering up but it looks as though they would rather drink more vodka-laced kool-aid.

We shall see, but I'm not holding my breath...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Mon Mar 8th, 2010 at 08:30:27 AM EST
hah! So, punish them by not letting them into the EU? Interesting idea.
by Upstate NY on Mon Mar 8th, 2010 at 10:10:16 AM EST
[ Parent ]
They are already in the European Economic Area (as part of EFTA). Therefore, economically and in terms of "internal market" legislation, nothing would change.

EU accession in this case is all about Eurozone accession, that is, a Bundesbank bailout and takeover of Iceland.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 10:35:10 AM EST
[ Parent ]
I wasn't aware of that, thanks.
by Upstate NY on Mon Mar 8th, 2010 at 01:00:55 PM EST
[ Parent ]
But that is central to the whole Icesave dispute: Icelandic banks were able to operate in the say they did because of EU common market freedoms, whereas the regulation of cross-border banking and in particular of deposit insurance was totally deficient. See the article linked to here.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Mar 8th, 2010 at 02:08:55 PM EST
[ Parent ]
require EFTA to expel Iceland or have certain important trade agreements with the EU...ummm...renegotiated.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Mon Mar 8th, 2010 at 07:03:22 PM EST
[ Parent ]
Which part of the regulation of cross-border banking and in particular of deposit insurance was totally deficient is unclear? How about EFTA and the EU go a little easier on the free market religion?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Tue Mar 9th, 2010 at 01:52:58 AM EST
[ Parent ]
Fantasizing about the EU throwing its weight around is apparently fun.

Bomb bomb bomb Starve starve starve externalized scape goat.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Mar 9th, 2010 at 04:07:43 AM EST
[ Parent ]
And on negative side for Iceland it would mean Iceland joining the disastrous fishing regulation of the EU.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Mar 9th, 2010 at 04:03:51 AM EST
[ Parent ]
On the basis of results coming in Sunday, many voters appear to have paid little heed to warnings that without the debt repayment agreement, Iceland will be unable to raise loans from the International Monetary Fund (IMF) or succeed in a bid for fast-track membership of the European Union.

If the Euro lords still consider those two things enticements, they need to re-think the new new economy, at least from a PR perspective.

On the other hand, a large portion of voters viewed the deal as an unfair result of their own government's failure to curtail the recklessness of a handful of bank executives, including those who expanded operations to seduce British and Dutch customers with generous returns from online savings.

Some, including members of the smaller Left-Green party in Iceland's ruling coalition, have even sought to portray the referendum as vote for a Plan B for the country to go it alone without IMF support.

However, many voters are thought to have been motivated more by opposition to the tough terms of the deal imposed Britain and the Netherlands, rather than the idea of repayment itself.

As it stands, the deal would apparently require each Icelander to pay around $135 a month for eight years - the equivalent of a quarter of an average four-member family's salary.

http://www.csmonitor.com/World/Europe/2010/0307/Iceland-financial-crisis-Voters-reject-debt-repaymen t-plan

fairleft

by fairleft (fairleftatyahoodotcom) on Mon Mar 8th, 2010 at 05:53:38 PM EST


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