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Revolting Iceland

by ChrisCook Wed Jan 6th, 2010 at 08:44:26 AM EST

Icelandic president says won't sign Icesave bill | Reuters

REYKJAVIK, Jan 5 (Reuters) - Iceland's president, Olafur Grimsson, said on Tuesday he would not sign into law a bill to repay more than $5 billion lost by savers in Britain and the Netherlands when the island's banks collapsed. After weeks of heated debate, Iceland's parliament late last month passed the bill in a move seen as a boost to the country's hopes of swift entry to the European Union and of getting its shattered economy back on track.

Bankruptcy

But the bill still required the approval of Grimsson, who was petitioned by nearly a quarter of the North Atlantic island nation's voters asking him to refuse to sign the bill and force a referendum on the fiercely debated issue.

This is only the second time in Iceland's history that the president has not signed into law a bill approved by parliament.

Frontpaged by Jérôme. See also the earlier diary Iceland revolts against debt-slavery by IdiotSavant for background on that decision and further discussion.


Display:
What does this mean for Iceland's government? Will there be new elections?

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 Jan 5th, 2010 at 06:36:10 AM EST
Referendum. Government loses.

New election, probably new constitution.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Jan 5th, 2010 at 07:30:46 AM EST
[ Parent ]
A casual look at some of the early responses on Dutch blogs seem to be fairly sympathetic to Grimsson´s decision - there's an overall sentiment that those who were foolish to lend out with risk, should not come back complaining.

In The Hague, in the VVD party (economicic liberals, who should know better) heads are exploding with such impeccal timing, that it simply looks contrived to me.

by Nomad on Tue Jan 5th, 2010 at 08:13:14 AM EST
Which international body could regulate any dispute? WTO, WB, IMF?

You can't be me, I'm taken
by Sven Triloqvist on Tue Jan 5th, 2010 at 09:14:36 AM EST
.
It's more like Icelanders shooting themselves in the foot ...

IMF bailout depended on settlement creditor disputes

The island is relying on a $4.6 billion bailout from the International Monetary Fund and the Nordic countries to avert bankruptcy.

The IMF has delayed its review of Iceland's economic program, originally scheduled for February, pending a resolution of the island's creditor disputes. Iceland has to date received $827 million in IMF funds.  

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Tue Jan 5th, 2010 at 09:36:02 AM EST
[ Parent ]
How so?

It's well known that IMF "assistance" mostly assists in turning disasters into catastrophes.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 10th, 2010 at 03:19:33 PM EST
[ Parent ]
There's wiki background to the dispute here, with detailed references.

You can't be me, I'm taken
by Sven Triloqvist on Tue Jan 5th, 2010 at 09:24:18 AM EST
it seems like england is bullying someone even weaker than she is, to me, ignorant bear that i am.

the economic version of the falklands...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Jan 5th, 2010 at 08:13:14 PM EST
[ Parent ]
Hello, world

Diversity is the key to economic and political evolution.
by Cat on Tue Jan 5th, 2010 at 05:01:10 PM EST
Can Iceland declare its old currency void and start over with a new one? Cancelling unpayable bank debts in the process?
by asdf on Wed Jan 6th, 2010 at 12:07:09 AM EST
.
Similar statements in the Netherlands: if Iceland backtracks on the negotiated creditors deal with the UK and the Netherlands, they can forget EU membership anytime soon.

Icesave veto could freeze Iceland's EU hopes

(Times Online) - Critics accuse the President - whose wife Dorrit Mousaieff is a colorful London socialite, once ranked as the Third Most Connected Woman in Britain - of populism. Others say he is playing into the hands of the Independence Party, the conservatives who led the country into the crisis in the first place with patchy regulation of Iceland's banks.

The Independence Party is now in opposition. Its former leader, the long-standing prime minister and ex-head of the central bank, David Oddsson, has become editor of the main daily newspaper and has been using it to spearhead a campaign against the Icesave deal, stirring up nationalist resistance. He and others in his party see it as a way back to power, despite their policies having been discredited.

But Britain has made plain: no Icesave deal, no fast-track for the EU. The harder Britain pushes for this linkage, the more the British look like the bad guys on Iceland.  

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Wed Jan 6th, 2010 at 02:31:28 AM EST
[ Parent ]
Does Iceland need to join the EU? They are members of the old EFTA so they have the EES-treaty for market access, they have free movement of labor within the Nordic cooperation. And Iceland has been much better in conserving their fish stocks.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jan 6th, 2010 at 03:15:43 AM EST
[ Parent ]
.
Landsbanki used EU rules as cover to get a foothold in and pick up capital in The Netherlands. Iceland should bide by EU commitment and take responsibility in deposit guarantee in the same manner as it did for domestic accounts. Icelandic citizens crying wolf with argument the Dutch were greedy! I believe it's political for the President not to sign to favor the opposition party and Independence movement.

The regulators in Holland were voicing some serious concerns they've had with all icelandic parties (government, regulators and banking). They were ignored and could not stop icesave from setting up show in Holland due to EU laws. Link to Dutch document detailing Icesave timeline: http://www.tweedekamer.nl/images/31371_295_feitenoverzicht_118-189461.pdf

Stop calling foreign depositors (!! not investors!!!!) greedy as it makes you look like a nation of pathetic crooks.

While they were setting up show in the UK and NL, the people at the central bank (and the Government!) in Iceland knew their banking system was going to blow. Pillaging your neighbours in the north sea shores while you know you're going bust is just downright criminal.

Please read the shocking report from Willem Buiter about the banking situation in Iceland drafted in april 2008.
http://www.cepr.org/pubs/PolicyInsights/PolicyInsight26.pdf

Everybody in Iceland knew it was going to crash ... the banks, the central bank, the government. They should all be brought to justice!

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Wed Jan 6th, 2010 at 04:48:42 AM EST
[ Parent ]
Everyone who is not blinded by greed and neoliberal illusions knows that if it is to good to be true, it is a scam. That goes primarily for regulators and bankers in Iceland, UK and the Netherlands, but also for the icelandic people that voted for the policies and the depositors in UK and the Netherlands who put their money in accounts not guaranteed by their own government.

And the deposits appears to be just the front page, the real issue is all liabilities of the banks.

Anyway, none of this answers if Iceland has any need to join the EU. If they are rejected now, I doubt they will want to join once the crises has passed.

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

by A swedish kind of death on Wed Jan 6th, 2010 at 05:29:06 AM EST
[ Parent ]
.
Iceland Debt Cut to Junk by Fitch as President Blocks Accord

Jan. 5 (Bloomberg) -- Iceland's credit rating was cut to junk by Fitch Ratings after President Olafur R. Grimsson blocked a depositor accord.

Fitch cut the long-term foreign and local currency issuer default ratings to `BB+' and `BBB+' from `BBB-' and `A-' respectively, the rating service said in a statement today. The outlooks on both long-term ratings are negative. Fitch also downgraded Iceland's short-term foreign currency IDR to `B' from 'F3' and cut the country ceiling to `BB+' from `BBB-'.

Finance Minister Steingrimur Sigfusson doesn't expect the bailout dependent island to receive its second International Monetary Fund review this month, he said, adding that he rules out the possibility of a government default.

Perhaps Icelanders can option for a Russian billionaire or Arab prince to buy the indebted island?

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Wed Jan 6th, 2010 at 05:39:55 AM EST
[ Parent ]
No surprise there - economically the Eurozone is not very different from the IMF/World Bank. There is a Brussels Consensus just as pernicious as the Washington Consensus.

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 Wed Jan 6th, 2010 at 05:46:49 AM EST
[ Parent ]
Iceland's EU accession is just as likely to flounder on Fisheries or Agriculture. A Eurozone bailout is the only thing that can make Iceland overcome its reservations on the other two areas.

So, you're right.

The Icelandic government should never have guaranteed non-deposit liabilities of Icelandic banks. This probably meant having some Icelandic bondholders get burnt at the expense of retail banking customers in the UK and Netherlands (though the UK local authorities that had millions of pounds in Icesave accounts were well beyond the deposit guarantee limit).

The question is whether the Icelandic government could now backpedal on the previous government's guarantee - a "selective default" but a default nonetheless which may have other ramifications.

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 Wed Jan 6th, 2010 at 05:42:32 AM EST
[ Parent ]
Not just the local UK authorities... Dutch provinces and counties had for tens of millions deposited in Iceland. The province of North-Holland is the most well known with a deposit over 78 million euros stored at Landsbanki... Sigh.

I don't know the total amount of provinces/counties money that was stored in Iceland.

by Nomad on Wed Jan 6th, 2010 at 06:28:14 AM EST
[ Parent ]
North-Holland can get their 100 thousand Euro back...

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 Wed Jan 6th, 2010 at 06:46:21 AM EST
[ Parent ]
North-Holland can get their 100 thousand Euro back...
LOL.

Anyway, I hope the Dutch will vote the idiots who put their money in Icesave accounts, out of office.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jan 6th, 2010 at 05:52:36 PM EST
[ Parent ]
.
Investment loss of € 78 million, poor management of a hospital gone bankrupt and CFO in the largest pension fund of Dutch government employees. Member of the Dutch Green party. Only after long delay, he quit his post as commissioner/governor of the province North Netherlands.

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Wed Jan 6th, 2010 at 06:40:45 PM EST
[ Parent ]
the deposits appears to be just the front page, the real issue is all liabilities of the banks.

However, the bill just vetoes by the President applies only to the Icesave deposits

... At the time of Landsbanki's collapse, the bank had over 300,000 Icesave customers in the UK, with deposits of over £4 billion (€5 billion).

... In the five months that it operated in the Netherlands, Icesave attracted more than 125,000 customers who deposited €1.7 billion.

IMHO Iceland should only be liable for deposits made in foreign branches of Icelandic-domiciled banks, not for deposits made in branches of foreign-domiciled subsidiaries of icelandic banks. Indeed
Landsbanki was a member of the Dutch and British compensation schemes for the purposes of guaranteeing this difference in cover, an arrangement known in Britain as the "passport system",[65] and commonly used by banks throughout the EEA.


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 Wed Jan 6th, 2010 at 05:56:57 AM EST
[ Parent ]
There is another interesting question here:

Suppose you burn the three Icelandic banks to the ground - raze them, liquidate their entire asset base and tell the bondholders, interbank markets, etc. to go fuck themselves. Would this be enough to repay the deposits?

Another interesting question is what the EU will do to aid Iceland in prosecuting the Icelandic oligarchs who skipped town with the loot...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 10th, 2010 at 03:31:48 PM EST
[ Parent ]
According to Buiter and Sibert the only way Iceland could have kept its internationally-active banking system was by joining the Euro ASAP. Of course, Iceland doesn't have an internationally-active banking system any longer so that particular argument is now moot.

Personally, I don't like microstates in the EU though as unanimous votes in the Council are phased out they are less of a problem - I think Malta and Cyprus were a mistake and Iceland is smaller than Malta. As you point out they are in the EEA.

Maybe the Eurozone should be reformed to allow non-EU central banks to join.

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 Wed Jan 6th, 2010 at 05:20:34 AM EST
[ Parent ]
I linked to the Buiter-Sibert paper yesterday.

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 Wed Jan 6th, 2010 at 05:37:27 AM EST
[ Parent ]
I think it is only the US that has that option, other nations tends to have their foreign debt in foreign currencies.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jan 6th, 2010 at 03:22:57 AM EST
[ Parent ]
Nah, mainly third world countries do that.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jan 6th, 2010 at 05:54:32 PM EST
[ Parent ]
Many other third world countries do that as well.

There, fixed it for ya.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 10th, 2010 at 03:33:29 PM EST
[ Parent ]
Those are two separate issues.  Declaring the old currency void can, and usually does, come with legislation or implementation which honors previous financial commitments in some way, usually, but not necessarily, in a way that benefits lending institutions to some degree. And canceling un-payable debts can be achieved without the hassle of a currency conversion.
by santiago on Wed Jan 6th, 2010 at 12:16:49 PM EST
[ Parent ]
$5 billion is 0.2% of the UK's GDP, 0.6% of the Dutch GDP, and 30% of Iceland's GDP (2008 IMF estimate from Wikipedia). This is not dire for Iceland and clearly petty for both the Netherlands and especially the UK.

The reason Iceland is bankrupt is not the Icesave deposit guarantee but the blanket guarantee of all bank liabilities which were 900% of Iceland's GDP in 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 Wed Jan 6th, 2010 at 06:30:30 AM EST
I don't think a lot has changed since JakeS wrote Odious debts have odious debtors
in the case of Iceland, it is clearly odious to demand that their taxpayers foot the bill for the fraud and gambling that was going on in their banking sector. So the Brits who got defrauded should seek redress from the fraudsters and/or their own government.

On the other hand, Iceland can hardly claim debt relief on the grounds that the debt is odious until and unless it shows some willingness to actually prosecute the fraudsters responsible. This has, as far as I can tell, never been seriously considered



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 Wed Jan 6th, 2010 at 07:27:19 AM EST
Huffington Post: IceSave Agreement: Just Sign It! (Iris Erlingsdottir, January 2 2010)
Tens of thousands of investors--individuals, municipalities, and charities--took advantage of the exceptionally high rates offered on Landbanki's IceSave savings accounts, only to discover that these accounts were not formally backed by any government. Landsbanki officials had inexplicably failed to register as a domestic bank in either country, and thus were not backed by government deposit insurance. When Landsbanki went into receivership on October 7th, British authorities invoked anti-terror legislation on October 8th to freeze Landsbanki's assets there.
(my emphasis) WTF!?
... Ólafur Ragnar should sign the bill because it's the right thing to do, and because the consequences of rejection would be disastrous.

...

[If the bill is not signed] the current government would almost certainly fall, and any chance at reasonable reform would die. The conservative Independence Party that ran Iceland until the collapse would retake power and restart the party. The businessmen whose reckless actions placed the county in danger would return with the illicit funds they've placed in off-shore accounts and buy Iceland's resources for a song.

Most importantly, the new government would take whatever steps necessary to ensure that these culprits never see the inside of a jail cell. The investigation of the misdeeds that led to Iceland's collapse has proceeded very methodically, and the special prosecutor now appears on the cusp of indicting some of the Independence Party's biggest supporters. If the investigators are allowed to continue, we'll see whether the rumors of money laundering for the Russian mafia are true, whether vast amounts of money are indeed sitting in Tortola, whether bank employees exploited pension funds with same glee that Enron employees exhibited while ripping off California consumers, and whether our politicians and regulators were bribable.

...

By signing it, Ólafur Ragnar would ensure that the new government would be able to finish what it has started--a thorough investigation into the events that led to our fall. Unless Eva Joly and Ólafur Þór Hauksson are permitted to complete their task, not only will the wrongdoers escape justice, but we will show them that there are no adverse consequences for their incompetence and malfeasance.

This raises the question of who is behind the InDefence group that started the petition against the Icesave law.

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 Wed Jan 6th, 2010 at 07:41:49 AM EST
Faux anti-bank populism is all the rage among right wingers world wide.
by rootless2 on Wed Jan 6th, 2010 at 11:00:09 AM EST
[ Parent ]
how can the United States place Bernie Madoff behind bars within weeks of discovering his fraud,

Madoff confessed.

while we're still waiting for the first indictment of any of the bankers?

US arrested Madoff, and he was bound over to foreclose a Sam Insull pursuit around the world. Investors, politicians, and regulators embroiled by the Landsbanki ponzi have confessed nothing. Pardon me, I don't see justice forthcoming from papering over malfeasance by paying off all complainants --at what appears to be par value, no where else in the world guaranteed, not even in the Madoff case. Moreover, what is stopping the "new government" prosecution of Icelandic civil and criminal law in the matter? Surely there are no IMF hurdles preventing such "reform" of its capital market.

Leave it Huffpo to publish material bound to leave the reader wondering, So what?


Diversity is the key to economic and political evolution.

by Cat on Wed Jan 6th, 2010 at 11:59:17 AM EST
[ Parent ]

Re: Odious debts have odious debtors:
Didn't the Icelanders get themselves a new semi-commie government? They should be able to deal with guilty capitalist roaders.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid (arvid.hallen at gmail.com) on Thu Aug 20th, 2009 at 02:47:43 PM EST
[ Parent ]

    The semi-commies, too, are in bed with (4.00 / 2)
    the banks, as I understand it.  

    The Fates are kind.
    by Gaianne on Thu Aug 20th, 2009 at 07:40:50 PM EST
    [ Parent ]

LOL. Buh bye, Iris.

Diversity is the key to economic and political evolution.

by Cat on Wed Jan 6th, 2010 at 12:31:45 PM EST
[ Parent ]
Mig
By signing it, Ólafur Ragnar would ensure that the new government would be able to finish what it has started--a thorough investigation into the events that led to our fall. Unless Eva Joly and Ólafur Þór Hauksson are permitted to complete their task, not only will the wrongdoers escape justice, but we will show them that there are no adverse consequences for their incompetence and malfeasance.

It would be a signal service to Icelanders were there some way to get this across to a majority of the electorate. How many of that electorate have any concept of what has happened and of the true role of their leaders at the time and the true nature of the risks they took and the responsibilities they ought to bear?

I would expect the former leaders to plead that they were just doing as the Americans and British were doing, so why blame them. I would also expect that clarity could much more readily achieved as the result of a legal process than a political process. $5 billion is not a lot of money on the scale of large coprorations and mid-sized and larger nations, but it is a lot of money on the scale of anyone of whom I can conceive as being favorably disposed to seeing that financial miscreants are brought to justice. After all, providing profits to the few and dumping liabilities on the many seems to be the point of the current "Anglo" system of political-economy.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jan 6th, 2010 at 08:41:36 PM EST
[ Parent ]
The left-wing blogging community unltd. tends to use the phrase DFH commonly, though the majority are too young ever to have met a real dirty friggin hippy except through the Time Inc. and Disney versions.

Hidden amongst those DFH's were the CSH's, clean sacred hippies, whose vision undergirds much of what's come to be accepted in the mainstream these days.  But now submerged by the ascendence of Gordon Gekko as mainstream role model.

The past two years of watching the powers that be try to mitigate the damages from the unbridled greed by all parties, portends that solutions don't come within the miasma, even though everyone and their mother claims to worship thinking outside the box.

When we look at the fallout from the icelandic banking collapse within the frame of Mig's % of GDP numbers, current posturing becomes absurd.  It's time one of them scraggly CH's (Crazy Hippies) rolled down off the mountaintop, gathered the parties into a room, sent in a kilo of hash from war torn Afghanistan, locked the door, and said we'll let you out when all parties are smiling in written agreement.

Sure beats having the IMF mediate.

In that spirit, a small human reminder to intersperse in the debate.

(I know i posted this new year's morn, but to this globally addled CH, it's somehow relevant.  More to the point, watch how the audience stuns Springsteen in his tracks during the song, and after it's over, takes the show into it's own hands.  Well, i though it was metaphorical anyway.)

PS.  my solution likely isn't any less valuable than the two years wasted by the conventional wisdom attempt.  We now return you to your regular ET high level analysis.  Maybe there's a way to build that aluminum smelter with enough environmental checks that it really should go to Iceland, as long as the entire social structure profits.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Wed Jan 6th, 2010 at 12:05:00 PM EST
Crazy Horse:
Maybe there's a way to build that aluminum smelter with enough environmental checks that it really should go to Iceland, as long as the entire social structure profits.

Dunno about building new ones: ask Jerome.

But you could refinance existing ones while taking them into common ownership....

gang8 : Message: Re: Iceland

As for resource rent, that is implicit in the production sharing enterprise
model I would suggest for Iceland.

Step One - approach bauxite producers eg Jamaica and make a tolling (production
sharing agreement);

Step Two - approach Japan and China etc and agree to sell them x million Units
each redeemable in payment for aluminium at $x per tonne. ie a loan repayable in
aluminium.

Step Three - use the proceeds of Unit sales to pay off debt and buy the
production facility - a compulsory purchase, if necessary - and then placing it
into the hands of a custodian for public benefit;

Step Four - appoint a managing partner on a production sharing basis.

The outcome is to get rid of debt (and implicit payments to bank shareholders),
and essentially to use aluminium as an energy vector for exporting Iceland's
free energy production. For eg Alcoa, it's not as bad as it looks, since as a
service provider they need deploy very little capital, and can return the
capital cost of the plant to shareholders.


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 6th, 2010 at 01:16:39 PM EST
[ Parent ]
had a comment of yours in mind when i wrote that.  certainly must be part of the general discussion.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Wed Jan 6th, 2010 at 03:34:48 PM EST
[ Parent ]
Maybe someone knows the details better than me but essentially we're talking about the Icelanders renouncing saver's deposits in the UK and the Netherlands but not (or at least not to the same extent) in Iceland.

Ummm...so, nation (EU member state nation) of domicile determines creditor pecking order in bankruptcy proceeding....and these guys are looking to join the EU?

Ok.

Look, we can talk about odious debts and whatnot all we want, but the thing is, Iceland is a representative democracy, arguably the oldest on the planet, and I've not read that this is changed and in fact a red/coalition is now in charge.

Its economic elites who managed the banks which have bankrupted the country (and make no mistake, the Icelanders are still in denial on this point, but their country is, in fact, bankrupt, playing by normal rules)  were overseen by regulators put in place by the people they elected. And so, any malfeasance is ultimately on the people. Understandably no one wants to admit they put in place people who gambled their money and now they are on the hook for 4 or 6 months salary in debt....but..they are.

If they had taken steps to put some bankers in jail, or better, served them to the English for UK-style Daily Mirror-reported justice, you know, I'd think this a mitigating factor excusing Icelander's shirking of their responsibility. Or, a complete middle finger to Europe, the UK and NL and withdrawal from Schengen (let's be consistent), making Iceland the Cuba of Scandinavia. Or both.

But this attitude of "screw of Dutch and the British" (because that is what they are doing) without any thought of real financial consequences (bye bye IMF guarantees, EU accession, Eurozone membership, bye bye favorable trade treaties allowing Iceland export to Europe virtually tariff-free) and also without assuming responsibility regarding punishing the guilty...fine Iceland, you can have the butter (renounce your debt) and the money from the butter (punish no one and pretend to be "independent") but et's see how Icelandic living standards are after a Cuba-style credit and tariff embargo for a couple of decades.

What, are they going to eat lamb, potatoes and herring for the next two generations? If they were really red/green they would try this, and I for one would be the first to applaud, but I think we all know the Icelanders won't do this. They still think they aren't bankrupt, and still haven't had the truth fed to them by the EU and the IMF. So, they have this fiction that they can renounce their debt, not punish anyone and still go on as little to nothing happened.

Ok. Good luck with that, Iceland.  

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

by r------ on Wed Jan 6th, 2010 at 06:10:26 PM EST
And so, any malfeasance is ultimately on the people.

Still, Iceland is a sovereign state, and a democratic one at that. This is a very good combination, as any "obligations" are ultimately subject to the will of the people, who will reject them if they find them unreasonable. And no one can do anything whatsoever about this.

That is, as long as the Korps Mariniers and the Royal Marines don't pay a visit, but no one is really expecting that anyway. For one, it would cost a lot more than the 5 billion dollars this is all about.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jan 6th, 2010 at 06:19:51 PM EST
[ Parent ]
That may be so.

But a sovereign renouncement of a debt which that sovereignty equally engaged will of course not be without consequence at the hands of other sovereign powers who, of course, have their own citizens to look out for.

I strongly suspect the Netherlands, the UK, ultimately the EU and of course the IMF will be doing the looking out for...

So, perhaps rodspeotter and herring is quite good, and I do love lamb and potatoes...but they do get a bit boring after awhile. Hmmm..for a good stew of course you need barley and carrots and an onion too, just lamb and potatoes isn't enough...does anyone know if these too grow on Iceland?

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

by r------ on Wed Jan 6th, 2010 at 06:25:44 PM EST
[ Parent ]
They can grow anything - when they don't have to pay to heat industrial greenhouses.

You can't be me, I'm taken
by Sven Triloqvist on Wed Jan 6th, 2010 at 06:34:04 PM EST
[ Parent ]
Well they have their hydro and geo-thermal...

Hmm...maybe they should try.

But as far as I'm concerned, if they renounce this deal, they should be shown the door from EFTA, and kiss accession and Eurozone membership goodbye.

Maybe the cousins in Norway should then bail them out like Abu Dhabi bailed out Dubai. But as an EU citizen from a Eurozone country...I'm not interested in bailing out a country smaller than Malta with debts bigger than Ireland and an attitude pretty similar to the Americans..."what, me? oops"

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

by r------ on Wed Jan 6th, 2010 at 06:40:31 PM EST
[ Parent ]
Why would Liechtenstein, Norway and Switzerland throw Iceland out of EFTA?

To satisfy your appetite for vengeance?

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

by A swedish kind of death on Thu Jan 7th, 2010 at 04:37:11 AM EST
[ Parent ]
EFTA bilateral trade agreements with the EU would be ended.

I'm sure there's language in those agreements in terms of breach of conditions...the EU had an army of lawyers in Brussels, I'm sure they can draw something out.

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

by r------ on Thu Jan 7th, 2010 at 08:18:37 AM EST
[ Parent ]
So the EU should decide who gets to be a member of EFTA in order to punish a small nation into paying their debts. Interesting.

What is the political objective sought here exactly? Making sure that next time there is a referendum on anything EU-related the "No/non/njet" has an actual act of imperial behavior to point at when claiming that the EU is turning into an evil empire?

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

by A swedish kind of death on Thu Jan 7th, 2010 at 03:52:27 PM EST
[ Parent ]
can keep its highly favorable bilateral trade agreements with the EU and invite just anyone into it?

Hell, why doesn't EFTA go ahead and invite Belarus?

And if not, why does it not follow that the EU, the far larger power in this partnership, can impose conditions on who can remain in it?

The political objective of all of this would to put sanctions on what frankly amounts to lawlessness, and which has damaged the interests of citizens of the EU which had been granting the law-breaking country special status and trade rights. You can simply think of it as fairness. And it was EFTA's trade treaties with the EU which made Iceland's theft possible - their banks couldn't be kept out, so damn straight that's how it should play. (Assuming Brussels has balls...big assumption...)

This isn't about getting a small nation to repay its debts, it's about getting the elites who ran that small nation into the ground  to repay money they stole. There's a difference. A big one. And of course it's up to the Icelanders to figure out how to make those who are guilty pay. Sounds like property expropriation, punitive progressive taxation and jail time would be in order but again, that's up to them.

I am somewhat bemused by your defense of the Icelander's behavior, seeing them as some sort of small hero against the evil, imperial EU. The EU didn't bankrupt them, their elites did. And now, the same political tendencies which facilitated the looting are at the heart of the campaign to screw depositors in the UK and NL by rejecting the deal. With this, you seem ok. As long as Iceland is standing up to the big bad EU and large NL and UK, they are the hero, even if they are essentially robbing from the poor and middle classes (the depositors they largely screw by reneging on this deal) to bail out their own wealthy elite's responsibility for this mess.

I'm not following how that is heroic, myself...

   

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

by r------ on Thu Jan 7th, 2010 at 05:01:45 PM EST
[ Parent ]
is that Dutch and UK deposits in Icesave has been protected by their respective governments. Icelandic payments would go to the 2 governments, not to savers.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Jan 8th, 2010 at 07:48:59 AM EST
[ Parent ]
To what extent is that because the savings were originally covered by UK/NL deposit guarantee schemes? At this point it is still unclear to me (and I see all kinds of contradictory claims on that point) whether Icesave was covered by both Icelandic and UK/NL deposit guarantees, or by neither, or whether the Icelandic one was intended to cover a part and the other ones the rest, or what.

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 Fri Jan 8th, 2010 at 09:02:08 AM EST
[ Parent ]
But the citizens of Iceland, like citizens all over Europe, are saying "Hey. I didn't approve this. Why do I have to pay?" 260,00 dollars per head, in the case of Iceland.

You can't be me, I'm taken
by Sven Triloqvist on Thu Jan 7th, 2010 at 04:43:07 AM EST
[ Parent ]
Oh, that one is easy. For 18 years the Icelandic people kept the neoliberals in power, with known consequences. And Icelanders did benefit (in the form of higher GDP) from the Ponzi scheme being run by their financial sector, to the tune of more than 260 dollars per head.

As I pointed out in a top-level comment, Iceland is not bankrupt because of Icesave, but because of said neoliberal government's guarantee of all bank debt (900% of Iceland's GDP). That was a political decision, while deposit insurance is a statutory requirement.

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 Thu Jan 7th, 2010 at 05:17:31 AM EST
[ Parent ]
Of course that is the logic of it, but the citizens then say -"We were not told of the risks. This is malfeasance."

If you've been to Iceland, you'll know that there is almost no physical evidence on the island of a lotto win. No skyscrapers, no fancy houses. No casinos. The greatest beneficiaries visible to citizens were the few booming restaurants in a hectare of downtown Reykjavik.

You can't be me, I'm taken

by Sven Triloqvist on Thu Jan 7th, 2010 at 05:28:45 AM EST
[ Parent ]
the citizens then say -"We were not told of the risks. This is malfeasance."

Then they prove they mean it by indicting the culprits.

Instead, they might just vote down the icesave law in a referendum, topple the current government, and return the Independence Party to 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 Thu Jan 7th, 2010 at 06:02:11 AM EST
[ Parent ]
Devil's advocate question:

Would indicting the culprits make EU accession more or less likely?

Morally it's the right thing to do. Legally, things get interesting, because if the debts are inherently fraudulent or illegal, repayment becomes less likely.

But in the world of realpolitik, I suspect that indicting the people responsible - aren't there only a handful of them? - might be more likely to chill Iceland's future prospects than a sovereign default.

You don't send in the tumbrils without a good reason.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jan 7th, 2010 at 02:00:12 PM EST
[ Parent ]
I'm taking the view that Iceland only needs EU accession to rebuild their hedge fundinternational banks, which they don't need to do anyway.

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 Thu Jan 7th, 2010 at 02:17:28 PM EST
[ Parent ]
I suspect that indicting the people responsible - aren't there only a handful of them? - might be more likely to chill Iceland's future prospects than a sovereign default.

THE HERETOFORE UNSPOKEN TRUTH! There seems to be an unwritten rule that the financial elite, when acting congruent to one another, are immune to existing laws. After all, the purpose of financial capitalism in the 21st Century is for financial elites to extract wealth from the rest of society by the best means possible. That "best means possible", in the USA, turns out to be the Internal Revenue Service, which extracts wealth from the taxpayers to cover the debts of the bankers.

Until and unless we get someone or some party that will actually investigate and prosecute seeming criminality the "seeming criminals" get to make the rules. I won't call them laws. The facts of life in a cleptocracy, be it Iceland, the USA, the UK,... floor is open for further nominations.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 7th, 2010 at 10:29:40 PM EST
[ Parent ]
got them into this mess, their actions now underline the fact that they really still haven't gotten the message.

Cede on this point and you invite the same neo-lib bullshit over again, but this time within the Eurozone.

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

by r------ on Thu Jan 7th, 2010 at 08:20:34 AM EST
[ Parent ]
I had to work 80+ hour weeks the first half of 2009 thanks to the financial crisis which of course the Icelanders egregiously helped create. It created problems for my company on a number of levels, one in terms of syndication representation, the other in terms of general business environment. So we had to essentially refinance the entire debt of my company (USD 1bn circa) to the consortium of 60 ors o banks which held that debt.

Guess which bank was by far the biggest pain in the ass in terms of misguided and prodding (and often quite stupidly, which was revealing) due diligence questions?

The assholes at Landsbanki who had less than 2%.

You let me decide and, given that these Icelandic weaktits who want to renounce the debt but who are incapable of holding anyone to account (except for an unfortunate and cancer-stricken former prime minister) I don't see where any pity should be shown.

I say fuck the lot of them.

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

by r------ on Wed Jan 6th, 2010 at 06:33:46 PM EST
[ Parent ]
As far as I know a majority in Iceland has been against EU entry before during and after this crisis.  A majority want closer links with Norway.  So threatening them with no Euro/EU etc. cuts little ice.  Threatening their EFTA membership - and access to EU markets - is a lot more serious - although I suppose the Japanese will buy their fish anyway...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jan 6th, 2010 at 06:44:23 PM EST
[ Parent ]
but you know, that's one of the few truly exportable thing they have. Hard to export hydro or geo-thermal power when you are an isolated island nation but hat's off to the Icelander for trying!

They do sell a lot to the EU though even beyond this. Let's see how exports to the EU look when their EU tariff profile looks like Zimbabwe's...

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

by r------ on Wed Jan 6th, 2010 at 06:56:29 PM EST
[ Parent ]
To produce and export aluminium is to export energy, and they could take aluminium production into common ownership as I outlined upthread.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 6th, 2010 at 07:16:43 PM EST
[ Parent ]
redstar:
And so, any malfeasance is ultimately on the people.

Which should of course apply to the UK as well. So the UK citizens can have their money when they have served their prison sentences for murders in Iraq.

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

by A swedish kind of death on Thu Jan 7th, 2010 at 04:34:00 AM EST
[ Parent ]
orgy of neo-liberal over-leverage, they can renounce debts to UK and Dutch depositors (don't forget, the Dutch were in Iraq too) even as they guarantee those of Iraqi citizens.

Keep in mind also that Dubya was happen to include Iceland in his "coalition of the willing", as that country sent roughly half its army.


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

by r------ on Thu Jan 7th, 2010 at 08:11:59 AM EST
[ Parent ]
Look at it this way then: if the population of UK and the Netherlands wanted regulation of banks in UK and the Netherlands they would have elected politicians that enforced regulation in UK and the Netherlands. They did not, so they did not want it. Thus they get the shoddy protection they voted for. Why should the icelanders be blamed for that?

It is either that or the "any malfeasance is ultimately on the people" is untrue.

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

by A swedish kind of death on Thu Jan 7th, 2010 at 03:41:57 PM EST
[ Parent ]
.
See my comments on The Netherlands here and here. Icesave pillaged $1.5 billion in savings from Dutch customers over a period less than one year, where Iceland Federal Bank was reluctant to provide the necessary financial information.

On Jan 5, 2010, Michel said:

> "where were the regulators in Holland and the UK when Icesave set up shop? Greed obscures thinking."

The regulators in Holland were voicing some serious concerns they've had with all icelandic parties (government, regulators and banking). They were ignored and could not stop icesave from setting up show in Holland due to EU laws. Link to Dutch document detailing Icesave timeline: http://www.tweedekamer.nl/images/31371_295_feitenoverzicht_118-189461.pdf

Stop calling foreign depositors (!! not investors!!!!) greedy as it makes you look like a nation of pathetic crooks.

While they were setting up show in the UK and NL, the people at the central bank (and the Government!) in Iceland knew their banking system was going to blow. Pillaging your neighbours in the north sea shores while you know you're going bust is just downright criminal.

Please read the shocking report from Willem Buiter about the banking situation in Iceland drafted in april 2008.
http://www.cepr.org/pubs/PolicyInsights/PolicyInsight26.pdf

Everybody in Iceland knew it was going to crash ... the banks, the central bank, the government. They should all be brought to justice!

Iceland the Poster Child for Neocon Fiscal Policy

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Thu Jan 7th, 2010 at 04:36:06 PM EST
[ Parent ]
Icesave pillaged $1.5 billion in savings from Dutch customers over a period less than one year, where Iceland Federal Bank was reluctant to provide the necessary financial information.

Indeed, what was the date when Icesave began operating in the Netherlands? By May 2008 the Icelandic government, central bank and all three major banks including Icesave's parent Landsbanki knew the following from the Buiter-Sibert report you link to:

... Using the  percentage shares that we calculated in the previous  paragraph and data on assets and liabilities of different  maturities found in the three large banks' 2008Q1 interim financial statements, we find that the difference  between short-term liabilities and short-term assets denominated in foreign currency and located in Iceland is 481,336 million kr. or $6.0 billion if short-run is defined as three months and 534,056 million kr. or $6.7 billion if short-run is defined as a year.

... Landsbanki publishes a table showing the cash flow payable by its group, classified by remaining contractual maturities. This yields a number that is about one and a half times as high as simply looking at assets and liabilities classified by maturities. If similar figures would result for the two banks that do not publish these numbers, then it may be that the central bank requires foreign reserves of $10 billion or about 800 million kr. if the short run is
defined as a year.

...

... Thus, the Central Bank of Iceland has already acquired access to a total of 391 billion kr. or $4.9 billion. Unfortunately, our estimates in the previous subsection suggest that this might be less than half of what it needs.

This was all confidential, of course. The Icelandic central banker Mr. Oddson covered his ass in May 2008
Displaying unusual (and commendable) candour for a central bank, in its latest Financial Stability report, the Central Bank of Iceland says, "Critics have asserted that the Icelandic banks have grown too large. This might be true if a major financial crisis was imminent and the Icelandic Government was forced to resolve a critical situation affecting banking operations both in Iceland and abroad."


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 Thu Jan 7th, 2010 at 05:18:32 PM EST
[ Parent ]
.
From my other link, factsheet Landesbanki Icesave in The Netherlands: launch date 29-05-2008.

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Thu Jan 7th, 2010 at 07:39:31 PM EST
[ Parent ]
The flip side of the argument is, what was anyone doing putting money in Icesave after the Icelandic Central Bank financial stability report from the first week of May?

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 Fri Jan 8th, 2010 at 02:30:50 AM EST
[ Parent ]
.
Easy to say in hindsight. Landsbanki and Icesave came on the market aggressively as Internet bank with excellent results in the U.K. (deposits of $6 bn). The savings would be protected by both the Iceland and Dutch guarantee fund. Who heard of a failed bank or a run on the bank early 2008? The interest rate offered was not spectacular, just 0.25-0.5% higher than the Dutch banks at the time. The folder was glossy and purveyed confidence. This remark is too easy, not realistic for persons looking at a bank to deposit their savings. Iceland was gaming the system just like the mob and they should suffer the consequences. Not all deposits will be claimed, just the basic numbers that should have been guaranteed, as I understand a maximum of $38,000 per account.

FEM Icesave save? (Aug. 9, 2008)


"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Fri Jan 8th, 2010 at 04:51:01 AM EST
[ Parent ]
The savings would be protected by both the Iceland and Dutch guarantee fund.
Well, that's either true [emphasis on protected by the Dutch guarantee fund] or advertisement fraud. Which one is 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 Fri Jan 8th, 2010 at 05:17:07 AM EST
[ Parent ]
Who heard of a failed bank or a run on the bank early 2008?
Why, just about everybody.

BBC: Run on the Bank: Northern Crock (9 November 2007)

Northern Rock is Britain's eighth largest high street bank and until recently was the darling of the City of London. Now it's in crisis, struggling for its very survival, propped up by the Bank of England, and waiting as potential buyers circle.

On 13 September, BBC business editor Robert Peston broke the story that Northern Rock was seeking emergency financial support from the Bank of England.

Northern Rock had found itself unable to secure loans from other banks on the inter-bank lending market, the Libor, so the Bank of England had stepped in as lender of last resort. The news set in motion a run on the bank.

Have you fallen for the trope that the financial crisis started in September 2008 with the fall of Lehman Brothers?

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 Fri Jan 8th, 2010 at 05:21:40 AM EST
[ Parent ]
One forgotten aspect of this is that online banking was promoted by a meme that was easy for consumers to 'understand': 'we can offer better rates of return because the costs of online banking are much lower without the need for a high street presence'.

In the consumer mind this was all wrapped up with the zero transaction costs of the Internet, zero cost filesharing and the amazingness of the brand new (to them) Internet in general.

To the marketing mind, this was another exploitable gap in the 'spread' between fact and fiction.

You can't be me, I'm taken

by Sven Triloqvist on Fri Jan 8th, 2010 at 05:55:20 AM EST
[ Parent ]
Sven Triloqvist:
To the marketing mind, this was another exploitable gap in the 'spread' between fact and fiction.

A new 'twist' with little 'reality leakage', eh?
by Bernard on Fri Jan 8th, 2010 at 04:44:30 PM EST
[ Parent ]
I do go on....

You can't be me, I'm taken
by Sven Triloqvist on Fri Jan 8th, 2010 at 05:38:29 PM EST
[ Parent ]
Okay, I looked at your "Is Icesave safe" link and I found this
De Nederlandse Icesave maakt gebruik van de garantiestelsels in Nederland en IJsland. De stelsels werken elk op een andere manier. Nederland kent een omslagstelsel. Mocht een bank failliet gaan, zoals bij de effectenbank Van der Hoop gebeurde, dan draaien de Nederlandse en buitenlandse banken die zijn aangesloten bij het Nederlandse garantiestelsel voor de schade op. IJsland hanteert een ander systeem. Er is geen omslagstelsel, zoals hier, maar er bestaat een Spaarders en Investeerders Garantiefonds.Het is een fonds waarin de aangesloten banken vooraf geld stoppen voor het geval dat. Maar wie het jaarverslag van 2007 goed leest, ziet dat het fonds nauwelijks geld heeft. Eind 2007 stond er omgerekend 67 miljoen euro op de balans, terwijl Icesave alleen al in het Verenigd Koninkrijk miljarden euro's heeft opgehaald.
Basically, that the Icelandic deposit guarantee fund only had €67M in it whereas Icesave had already gathered billions in deposits.

I'm assuming any Dutch internet user looking for information on Icesave would have been able to find such information...

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 Fri Jan 8th, 2010 at 06:47:23 AM EST
[ Parent ]
.
"Icesave clients" will get their cash back

Dutch savers who put their money into Icelandic internet bank Icesave will get up to €100,000 of their money back, whatever happens, finance minister Wouter Bos promised.

Bos did not rule out taking legal action against the Icelandic government, which is technically guarantor for the first €20,000 of each saver's cash.

Dutch officials will be talking to the Icelandic authorities about getting savers' money back. But discussions over the past few days have proceeded with `great difficulty' the Telegraaf reports.

Frozen accounts

All the bank's accounts were frozen at the beginning of this week when Icesave's parent company Landsbanki was put under government control after getting into financial difficulties.

Some 120,000 people in Holland have a total of €1.7bn in Icesave. The Icelandic government is responsible for the first €20,000 or so, with the Dutch guaranteeing the rest up to €100,000.

Central bank president Nout Wellink said that most Dutch claims are under €20,000. Savers will get a form to fill in next week to make their claim.

Independent Islandic News: The Icesave fraud case

When the credit lines closed on Iceland in mid 2007, the Icesave had been started to drain money from the UK to divert into offshore island for personal gain. This is no bullshit, this is what most of the money went into. The UK was systematically drained of money. This flow of cash kept the banks alive here in Iceland, and kept up the vail of deception pulled over the eyes of the public and in some parts the politicians´as well.

The deception was kept alive by the media, owned by the bankers, and the Icelandic Chamber of Commerce, The Independence party, the Central Bank, the government and all those who played along to the song of easy money. The worst part is that when some hard criticism came along from academics and the foreign media they where shot down and said to jealous, angry or plain stupid. The media, the Central Bank and the government said this.

When the Icesave was started in the Netherlands the credit lines were already closed to Icelandic banks and financial companies.

British SFO to probe Islandic bank

La crise financière et bancaire (X large pdf)

341. Il est assez notable de remarquer que plus aucune des 2 banques n'a fourni de communication officielle sur leurs états fi nanciers depuis le deuxième trimestre de 2008.  

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Fri Jan 8th, 2010 at 01:48:41 PM EST
[ Parent ]
Some 120,000 people in Holland have a total of €1.7bn in Icesave. The Icelandic government is responsible for the first €20,000 or so, with the Dutch guaranteeing the rest up to €100,000.

Thanks.

When the credit lines closed on Iceland in mid 2007, the Icesave had been started to drain money from the UK to divert into offshore island for personal gain

2007 or 2008? Are we talking about the original credit crunch in the 2nd half of 2007, or about the final stage of the run on the Icelandic banking system?

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 Fri Jan 8th, 2010 at 05:35:43 PM EST
[ Parent ]
.
Still counting UK's cost of Icelandic meltdown

While a lot of small retail savers in the Icelandic banks ended up keeping their savings, many big organisations including councils and charities are still fighting for their cash. Experts say it could take up to four years to sort out.

And as Iceland's over-leveraged investors were obliged to pull out of their investments in the UK, they have left a trail of woe - from collapsed High Street giant Baugur to City broker Teathers and West Ham football club.

Here we look at how the meltdown is still affecting the UK:

Savers: consumers and small business - potential bill could be over £2.5 billion

All private individuals with deposits in Iceland banks in the UK have, or will theoretically, get their money back. Britain's Financial Services Compensation Scheme has already paid out £4.4 billion to cover savings up to £50,000 in individual accounts. Sums above the £50K limit are covered by the Treasury but administered by the FSCS. The compensation bill so far is £2.5 billion for deposits at Kaupthing Singer and Friedlander, £500 million for savings at Heritable bank, and £1.4 billion at Landsbanki's Icesave.

The FSCS recoups the money by charging all British financial services firms an annual levy to cover potential compensation payouts. For 2009-10, the levy will be £406 million to cover just the interest bill on money for savers at all failed banks.

See in my comment above, the Central Bank (DNB) in The Netherlands were give inferior or no financial statements upon request. In October 2008, the Dutch tried to protect the deposits and assets of Landsbanki in the Netherlands. The permit to open the Icesave bank in The Netherlands was from Iceland, as the headquarters of Landsbanki was established there. The Dutch were not able to protect the Dutch savers, Iceland gave priority to their locals. That's the reason Gordon Brown or the U.K. took the drastic measure using the Terror Act to block asset movement to foreign entities. A few days later, without a written document, the Dutch convinced the court the banking permit had been revoked in Iceland, thus the assets were frozen. The EU regulation was not made for such a financial calamity. Iceland made the most of it by giving preference to their domestic savers. I can imagine the Brits, Germans and Dutch would be irate.

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Fri Jan 8th, 2010 at 06:43:22 PM EST
[ Parent ]
On the issue of deposit insurance you have a situation where European Union freedoms of establishment and service mean that Icelandic banks could legally open branches in the UK and Netherlands wile remaining regulated by the Icelandic authorities and not the British or Dutch ones.

We have here three countries with shoddy bank regulation brought by neoliberal governments voted in by the people. Except that the UK and the Netherlands can absorb the Icesave losses while Iceland is broke anyway because of the blanket guarantee of the banks' liabilities. So the outcome of all this is all independent of what Iceland does with Icesave. Maybe Iceland are better off not getting an IMF loan, that shit is toxic.

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 Thu Jan 7th, 2010 at 05:04:18 PM EST
[ Parent ]
In an interview with NRC Handelsblad, Eva Joly of the Greens in the European Parliament and favourable to the Icelandic position, commented that at least three parties can carry blame - the regulators in Iceland, the regulators in the Netherlands and the regulators in the UK.

I am not familiar with the nitty gritty to get too involved there, but I'll only coment that it then would be the third time in a row that the Dutch regulators of the Nederlandsche Bank are caught sleeping (first with ABN, second with the Dirk Scheringa Bank last year). In other words, there have been precedents of Dutch regulatory laxness - almost unsurprisingly, I'd add.

by Nomad on Thu Jan 7th, 2010 at 04:47:22 AM EST
[ Parent ]
Regulatory oversight is shoddy whenever you have a neo-liberal political framework for funding and resourcing regulatory priorities and enforcement thereof. We can add the US and Ireland to Joly's list for sure.

But, the difference in all of these cases is that they treat all depositors equally, even as their oversight is shoddy.

Not so, Iceland, apparently.

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

by r------ on Thu Jan 7th, 2010 at 08:14:23 AM EST
[ Parent ]
FT.com / Comment / Opinion - Iceland can refuse debt servitude

Olafur Ragnar Grimsson, Iceland's president, has created uproar with his decision to block legislation that would have repaid €3.9bn ($5.6bn) lost by British and Dutch savers in a failed Icelandic bank, triggering a referendum that the government is expected to lose. The initial response by credit rating agencies was to downgrade Icelandic bonds, as if Iceland were repudiating its debts, Argentina-style. But opponents of the bill have no intention of reneging on their legal obligations.

At issue is what the relevant European law says should be done - and, more to the point, what should have been done on October 6 2008, when Gordon Brown closed down the UK operations of Icesave, an online subsidiary of Landesbanki, Iceland's second-biggest bank. Icelandic authorities were given no voice in how to resolve matters. Did the British prime minister let Iceland off the hook by jumping the gun in reimbursing depositors as though they were covered by UK insurance rather than following European Union procedures?

Icelandic voters are worried about how they reasonably can be expected to pay enough in taxes to cover the huge debt. The problem is that foreign debt is not paid out of GDP. It is paid out of balance-of-payments receipts from net exports, from the sale of assets to foreigners and from new borrowing. The market for cod is limited, and many of Iceland's quota licences already have been pledged to bankers for loans, whose debt service absorbs much of the export revenue. Interest charges also absorb most of the revenue from its aluminium exports and its geothermal and hydroelectric resources, leaving little taxable revenue behind.

There is also a dagger hanging over the heads of Iceland's homeowners: mortgages and other debts are indexed to the consumer price index. For an import-dependent country such as Iceland this, in effect, means the foreign exchange rate. Attempts to pay more foreign currency than the nation can generate in export earnings will cause the currency to depreciate and raise monthly mortgage bills. Many will lose their homes. Many already are. There is a moratorium on foreclosures, but it expires in February.

A pragmatic economic principle is at work in such conditions. Debts that cannot be paid, will not be (unless one pays back Peter by borrowing from Paul). At stake, therefore, is how much can be paid without wrecking Iceland's economy. How many Icelanders must lose their homes as carrying charges soar on mortgages indexed to the exchange rate? Emigration is accelerating, and many foreign workers already have left. How many more must depart? And if the post-Soviet experience of a steep and sudden drop in living standards is relevant, by how many years must Icelandic lifespans shorten?



"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Jan 7th, 2010 at 06:58:00 AM EST
FT.com / Comment / Editorial - Do not put Iceland in a debtors' prison

Olafur Ragnar Grimsson, Iceland's president, this week rejected a law settling his country's dispute with the UK and the Netherlands over the sorry Icesave affair. In truth he had little choice: a quarter of this fiercely independent electorate signed a petition against it, a show of defiance no leader can ignore.

The law will now go to a referendum, likely to vote it down. This may teach Dutch and British leaders the limits of what can be achieved with duress, but too late to do anyone much good.

It is hard to fathom the need to make an example of Iceland. For the creditors, the loans are trivial: they sum to €3.9bn, one-hundredth of what the UK alone will borrow this year and next. Neighbourly generosity would cost Amsterdam and London next to nothing.

They are also not innocent victims. British and Dutch banks benefited greatly from the rules. Had they failed on the same scale, it is delusional to think their governments would take on hundreds of billions in debt to rescue foreign savers, and odious to force a weak neighbour to do the equivalent.

From the start, Iceland has been under the gun. Loans from Poland, Nordic neighbours and the IMF depend on successful IMF reviews that in turn hinge on an Icesave solution. A lifeline-grasping application for EU membership is hostage to British and Dutch goodwill.

Landsbanki showed that Europe must reform its rules to achieve stronger common standards. This will not be done by putting Iceland in a debtors' prison.



"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Jan 7th, 2010 at 07:01:55 AM EST
[ Parent ]
They are also not innocent victims. British and Dutch banks benefited greatly from the rules. Had they failed on the same scale, it is delusional to think their governments would take on hundreds of billions in debt to rescue foreign savers, and odious to force a weak neighbour to do the equivalent.

A central bank should never allow the banking sector for which it acts as lender of last resort to accumulate foreign currency liabilities (let alone short-term liabilities or <gasp> on-demand deposits) in excess of the foreign currency reserves the central bank holds. This can be achieved in two ways, through banking regulation, telling the banks to reduce their foreign currency exposure or else; or through monetary policy, accumulating foreign reserves in the open market.

The Icelandic central bank was between 1/2 and 2/3 short of the currency reserves needed to cover the Icelandic banks' foreign currency liabilities, and had just about enough (including currency swaps) to cover Icesave depositors. So, epic fail on the part of the Icelandic central bank.

I would hope the Financial Times of all people wouldn't argue it would be delusional to have a lender of last resort who can act as such.

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 Thu Jan 7th, 2010 at 07:31:07 AM EST
[ Parent ]
This also answers Michael Hudson upthread:
The problem is that foreign debt is not paid out of GDP. It is paid out of balance-of-payments receipts from net exports, from the sale of assets to foreigners and from new borrowing.
Well, then, if you are a net importer (as Iceland is) you need to keep your currency slightly overvalued which prevents you from accumulating foreign reserves, so you should keep your foreign debt under control. Another epic fail of Iceland's monetary policy.

In sum, a net importer with a large internationally-active banking system cannot have a stable monetary policy. And when the currency goes so goes the banking system, and you're left with an import dependence and no way to pay for 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 Thu Jan 7th, 2010 at 09:29:56 AM EST
[ Parent ]
There is also a dagger hanging over the heads of Iceland's homeowners: mortgages and other debts are indexed to the consumer price index. For an import-dependent country such as Iceland this, in effect, means the foreign exchange rate. Attempts to pay more foreign currency than the nation can generate in export earnings will cause the currency to depreciate and raise monthly mortgage bills.

More stupid monetary policy.

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 Thu Jan 7th, 2010 at 09:31:02 AM EST
[ Parent ]
.
[Most links added are mine - Oui]

Iceland's Economic Meltdown Is a Big Flashing Warning Sign

(AlterNet) Oct. 21, 2008 - Iceland, despite its coalition governments and Nordic social values, became a poster child for neoconservative economic policies inspired by Milton Friedman during the past decade. Friedman himself visited Iceland in 1984 and participated in what was described as a "lively television debate" with leading Socialists. This inspired a generation of young conservatives who came to power through the Independence Party in 1991 and have run its government through different coalitions since then.

Friedman may be dead now, but the economic and financial collapse of 2008 is becoming a real-life battleground of his theories against those of the other giant of 20th century economics, John Maynard Keynes.

Keynes' analysis was complicated and nuanced. The work for which he's best known, The General Theory of Employment, Interest, and Money, provided a theoretical basis for the economic reforms of the New Deal era -- investments in public works and deficit spending that helped countries recover from the Great Depression.

While Friedman's narrow form of money supply monetarism was quickly abandoned in the early 1980s, most governments have relied primarily on monetary instead of fiscal policy for stabilization of their economies over the past few decades. This turned Alan Greenspan, former head of the U.S. Federal Reserve and an advocate of Friedman's policies, into the most important economic policy maker in the world.

ICELAND'S EXPERIMENT WITH FRIEDMAN POLICY

Under the leadership of Prime Minister David Oddsson and explicitly inspired by Friedman, Iceland's neoconservative young Turks implemented a radical (but now familiar) program of privatization, tax cuts, reductions in spending and deficits, inflation targeting, central bank independence, free trade and exchange rate flexibility. Corporate taxes were cut from 50 percent down to 18 percent. Privatization and deregulation were driven directly through the prime minister's office, and the major banks were privatized.

Economic missions and reports on Iceland issued by the influential International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) largely praised and encouraged these reforms, often disregarding the rising risks for its financial sector until recently.

In 2001, Joseph Stiglitz, recipient of the Nobel prize in economics and one of the leading lights of the "New Keynesian" school of economics, wrote a remarkably prescient paper for the Central Bank of Iceland. In the paper, he raised alarm about a vulnerable, small, open economy such as Iceland suffering from a severe financial and economic crisis from such policies. In the absence of reforms in the "global financial architecture," Stiglitz outlined a set of regulatory and tax measures that Iceland should implement "both to reduce the likelihood of a crisis and to help manage the economy through a crisis."

Stiglitz's paper (PDF) has invaluable advice that should have been considered by any nation -- and especially Iceland -- but it appears these recommendations were ignored. The right-wing reformers certainly didn't change their course. Why would they? Life was good and getting better in the small island state, with showrooms full of fancy cars and booming real estate, business and financial industries.

BOOMING ECONOMY

At first, the policies appeared to be very successful. The economy grew at a strong pace, rising until Iceland achieved one of the highest per capita GDPs in the world. In 2007 it also topped the score for the United Nation's Human Development Index.

Iceland rocketed to the top 10 in the indexes of economic freedom designed by the Fraser Institute and the Heritage Foundation. It was lauded by the conservative Cato Institute for its flat taxes, privatization and economic freedoms. The institute also criticized Naomi Klein for not mentioning Iceland (along with Ireland, Estonia and Australia) as an example of success in her book about the rise of disaster capitalism, The Shock Doctrine.

Icelandic banks and businesses, with the support of their government, expanded aggressively overseas, particularly into the U.K. and the Netherlands. The banking industry and private businesses flourished and created a number of new billionaires on the island.

Then it all came crashing down.

A Voice from the Friedmanite Wilderness

"But I will not let myself be reduced to silence."

Global Warming - distance between America and Europe is steadily increasing.

by Oui on Thu Jan 7th, 2010 at 01:14:56 PM EST
Nordiskt extramöte om Islandslån - sr.seNordic extraordinary meeting on Iceland loan - sr.se
Islands finansminister Steingrímur Sigfússon ska i morgon träffa sina nordiska kolleger för att övertala dem att stå fast vid sina lånelöften till Island. Det uppger en talesman för det isländska finansdepartementet.Iceland's Finance Minister Steingrímur Sigfússon will tomorrow meet with his Nordic colleagues to persuade them to abide by its promises of loans to Iceland. This says a spokesman for the Icelandic Ministry of Finance.
Tidigare har nordiska politiker antytt att lånen inte skulle betalas ut om Island inte gick med att betala sina skulder till Storbritannien och Nederländerna på grund av den isländska internetbanken Icesaves kollaps.Earlier, the Nordic politicians suggested that the loans would not be paid if Iceland did not agree to pay their debts to Britain and the Netherlands because of the Icelandic internet bank icesave collapse.
Beslutet om återbetalning är uppskjutet i avvaktan av en folkomröstning på Island.The decision on the repayment is deferred pending a referendum on the Island.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Thu Jan 7th, 2010 at 04:34:29 PM EST
Some interesting discussion re Iceland

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Jan 8th, 2010 at 08:09:33 AM EST


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