Relations between the UK and Iceland hit the deep freeze today.
It’s a bizarre scenario. For the uninitiated, it revolves around Landsbanki’s UK operations, Icesave, into which thousands of Brits, including a number of local councils, deposited their money.
Yesterday morning UK Chancellor Alistair Darling was quoted as saying that “believe it or not” Icelandic authorities had “told him” that they would not be honouring their commitment to foreign depositors to compensate them for losses, adding that it seemed as though the Icelandic state did not have enough funds to do so. A short while later, Gordon Brown blasted the Icelandic government, saying the UK government would sue Iceland’s ass to the max in order to fully recover any funds that were lost.
Meanwhile, Icelandic authorities were, like, Dude! WTF!?! No one had any recollection of telling Darling anything of that sort.
So everyone started spinning in circles, trying to figure out how the Brits had arrived at this conclusion. See, over here we’d been told that our government WOULD guarantee deposits in those Icesave accounts. So the Brits must have misunderstood, people said. Something lost in translation, or whatever.
In trying to find a scapegoat, lots of people leaned towards an interview with Central Bank Governor Davíð Oddsson in Kastljós on Tuesday night, in which [as I understood it, at least] he said that those who had invested in SHARES in the Icelandic banks would probably incur losses, just as they have here, but that regular depositors would be covered by the same compensation scheme that Icelandic depositors are. This seemed to be the most likely scenario for the cock-up and by this morning, half of the population was once again furious at Doddson* for speaking so recklessly as to make old Gordon Brown misunderstand him. [Whether it was proper for Doddsson to appear on state television and shoot off his mouth the way he did is another matter entirely.]
So our PM Geir Haarde had to go into serious damage control mode with the Brits yesterday, getting the message across that the whole thing was based on a misunderstanding and that naturally Niceland would be honouring its commitments like the civilized nation it is. Yes, but was the nation “going bankrupt” as Alistair Darling had said? Geir reiterated it was not and that the liquidation of Landsbanki’s assets would likely go a long way towards covering those deposits.
The tragedy in this “little misunderstanding”, however, is that when the GORDON BROWN THREATENS TO SUE ICELAND headlines hit the UK yesterday, there was a bank run on Kaupthing, our last remaining functioning bank and the one deemed to have the potential to carry on operating. Last night it, too, folded and was taken over by the state.
It was bad enough to wake up to that on the news this morning, but imagine our surprise to learn that Gordon Brown had invoked fricking anti-terrorist legislation in order to freeze Kaupthing’s assets. Not only that, but he appeared in the global media this afternoon slamming the actions of the Icelandic government as “totally unacceptable” - still claiming that we were not going to honour our committments, even after our Minister of Finance had spoken to Darling this morning and told him YET AGAIN that Iceland would be compensating the depositors.
The acting Minister for Foreign Affairs instantly summoned the British Ambassador for a meeting and made it clear that the Icelandic authorities considered this matter to be very serious and detrimental to our diplomatic relations. I mean: being called Terrorists? By a supposed ally? On par with Osama Bin Laden?
Honestly, the whole thing seems totally and utterly out of proportion and the British Prime Minister completely out of line. To make radical statements that have the potential to cause so much damage without even first going the diplomatic route, even just CONSULTING your counterpart here in Iceland to see if there is any truth to the allegations … it just seems completely bizarre and makes one wonder what else is going on. My first thought was that Brown’s over-stressed, that he lost his cool and / or was looking for someone else to blame. But for what? - The answer seemed to present itself later in the day, when it transpired that the British government had urged a lot of the local councils to invest their money in the Icelandic banks - and now the councils were furious and demanding that the government do something to help them recover their losses.
Meanwhile, Darling claims the [mis]understanding came about in conversation with our Minister of Finance Árni Mathiesen. Being the least popular of our cabinet ministers and an exceedingly tactless man, a lot of people here are calling for the transcript of that conversation. I, for one, would love to hear it. In fact, I think we NEED to hear it, if only to determine whether old Árni needs to be sent to English language classes. [But in line with Icelandic government administration, we probably won't.]
Ah. All this drama. Sad to see it come to this, especially with the UK which is a nation so dear to the hearts of most Icelanders, YT included. Just adds to the gloom and doom of this wretched situation.
PS. Those of you in the US will be able to hear me interviewed on The Takeaway on WNYC radio in New York at 6.10 am tomorrow. If you get up that early.
* Thanks to Dr Gunni for coining that phrase.
{ 76 comments }
Read this, earlier tonight: “One Labour MP said last week that the only way back for Gordon Brown was an equivalent of the Falklands War.”
Old Gordon’s saving his own skin and popularity by making up an enemy, of course the enemy needs to be small and manageable, I think we just got unlucky, when he needed an adversary. Sorry to say, Brits!
That is just unbelievable. Blame culture wins again.
And the sad thing is, it will take the UK media weeks to draw this picture up for the British nation. And having the entire Britain mad at my dear Niceland makes me so sad.
Plus by freezing assets of Landsbankinn, Gordon just lowered the value of the assets the Icelandic government was going to use to pay the poor people and councils their money back.. witch makes it so much harder for the Icelandic government to keep their promise. I’m just… sad today.. and a bit angry.
Yikes. I have been watching what’s hapening in Iceland with half an eye (too much happening here right now) and skimming your posts but can’t begin to take it all in. I, too, would hate to be on poor speaking terms with the UK. I’ll keep watching your blog.
Alda,
I nearly fell of my chair when I saw the Telegraph headline “Gordon Brown to sue Iceland”! WTF??
Sorry to be a bit dense, but I’m honestly struggling to picture the actual mechanics of Brown suing Iceland. I’m afraid it makes no sense to me whatsoever, on any level. Perhaps I’m a simpleton, but I just can’t begin to grasp the logic of it, whether he has locus standi to sue another government for financial - financial what?, actually - or how he can imagine that litigation on his part would procure a speedy, effective and palatable result.
Can anyone here perhaps shed light on this bizarre development, for those of us who are completely baffled by the latest cr@p from Brown?
Oh and of course I hope things improve for Iceland, Gordon Brown’s dementia notwithstanding….
How’s Polly? I could do with a little Polly news amid all of this world financial meltdown.
Otherwise, hang tough. You’re wise to take the long view. I don’t think that Iceland’s going anywhere soon.
I’m just angry, to be honest.
Well that explains a lot. Keep it up Alda.
There are serious discussions in UK political blogs about just how mentally unbalanced Gordon Brown really is. The consensus is quiet a bit.
Brown is a deeply flawed person completely unfit for high office. He has been desperately trying to hold onto power for the last year. I suspect he has destroyed Icelands last chance of scrambling off the edge of the chasm by deliberately misunderstanding what was said or quiet simply making it up. He has a track record of utter mendaciousness.
Now to get Icelands story into the UK press. Brown is the most unpopular PM in modern history. The UK press maybe very sympathetic to Icelands side of the story if Brown can be shown to have acted in an unscrupulous and totally underhand way.
Unbelievable that no one in the UK govt or UK media took the time to double-check their “facts” and just jumped to conclusions like that.
Here’s hoping that the two govts can iron things out and get back on good terms and try to set up more open lines of communication.
Simply disgusting. This makes me spit. It makes me want to return my British passport (but it’s expired anyway). I’m struggling right now to find a reason to apply for a new one. May I just add that, as the citizen of a small, relatively affluent country, I’ve observed the UK press (and now its government) seems to have developed a tradition of small, relatively affluent country-bashing.
These comments by the British Government are simply unacceptable. Also in Belgium (where we have our own very small Iceland bank failure) it was reported that the Iceland Government had pledged to guarantee all savings of Iceland’s residents, leaving the fate of foreign resident’s savings in the dark.
You would also have to accept as a fact that given current market conditions, the unwinding of the Iceland banks is unlikely to leave a hole that can be plugged by the Iceland government. I for one am not surprised that they will bail out their own residents first. That is the right choice.
Unless Iceland finds a friendly country very quickly that will plug this hole for them, at the cost of …?, Iceland will default on its foreign obligations. You may find that friend in Russia, but there will be strings attached. (Does Iceland have any claims on the north pole?)
I mentioned tourism as a possible way out for the icelandic economy. On a more cynic site I read the possibility of a baltic style tourism (that is: stag parties, with all the drinking and other sordid entertainment that comes with it).
I am sorry to be pessimistic about the short term future of your country, but I just think it is not going to do any good nancying around about it.
“And having the entire Britain mad at my dear Niceland makes me so sad.”
Well make that entire Britain minus me and my boyfriend at the very least!
This is the Act in question:
“The Regulation of Investigatory Powers Act allows for the interception of communications, acquisition and disclosure of data relating to communications, carrying-out of surveillance, use of covert intelligence sources and access to encrypted or password-protected data.
It can be evoked by public servants on the grounds of national security, and for the purposes of preventing or detecting crime, preventing disorder, public safety, protecting public health, or in the interests of the UK’s economic well-being.”
And that’s the key thing - its not solely an anti-terrorism law, (I believe it actually pre-dates 9/11 but I’m not 100% sure of that). Its a blanket law for anything criminal. Frankly I think it makes a mockery of this country being free and democratic.
It effectively means that local councils can, if they can find an excuse, look at logs of websites I visit, who I e-mail, phone or fax as well as putting me under survelliance if they see fit.
Here’s a list of a few of the things they have been used for other than freezing Icelandic bank assets:
Using cameras to spy on people dropping litter
Tackling dog fouling
Stopping the unauthorised sale of pizzas
Stopping the abuse of the blue badge scheme for disabled drivers
Survelliance operations on shops to check if they are selling alcohol and cigarettes to under age children
Following people to check they live in the correct catchment area for a school
Using sound recordings to monitor noise pollution
Accessing council staff’s emails to their behaviour.
This has been taken to the European Court of Human Rights earlier this year by human rights group Liberty. They won a judgement that this law was not clear and that it could be infringing individual privacy rights when using survelliance when people were making cross border communications. I’m not sure of the ECHR view on its use domestically, but certainly the very fact they are unhappy with its use across borders must raise questions.
From a personal point of view, I feel that my country is sleep walking into a police survelliance state. It started ironically in my home town - the IRA bombed Warrington killing 2 children in 1993, and ever since councils have been installing CCTV to stop crime. We are now the most monitored nation in the world. Add to this proposals of ID cards with biometric data and you have a recipe for a country not so different from George Orwell’s 1984.
Two of our good friends moved to New Zealand earlier this year - a lot of their motivation was the incoming privacy laws. For me and my boyfriend it is much the same - we are working towards trying to leave the country at some point in the next couple of years.
The thing that gets me, is that the majority of people here seem to happy with this - ‘as its preventing crime’ and don’t stop to question any of it.
The British media seem to be jumping on spin, spin, and more spin - piled on top of a whole lot of blame. Unfortunately, the British Government (as per usual) are pandering to this by announcing unfounded and un-thought out accusations about Iceland. In fact, the only British paper that seems to giving a reasonably unbaised view of the whole shambolic episode, is The Times.
As a British citizen, I have to agree with the Icelandic PM that it is the sheer incompetance of Gordon Brown and Alistair Darling that has tipped the balance in Iceland. If they had just kept things quiet and addressed things through Diplomatic means then there is a high chance that (as you point out) at least Kaupthing (and quite possibly Landsbanki) would not have been taken over by your Central Bank…
Noone I know here in the UK thinks badly of iceland - everyone thinks Brown is a nutter, and this is to make him look tough — his last plan to look tough was to put throuh legislation to lock people up with out charge for 42days — this legislation is about to die, so he needs a new act.
Sorry Iceland - if we could do anything we would, but we are stuck with him for another couple of years
Brown seems to be trying to clarify things. He recently said: “This is fundamentally a problem with the Icelandic-registered financial services authority - they have failed not only the people of Iceland; they have failed people in Britain.”
So now he’s blaming Iceland’s FSA - not the whole of Iceland. What do Icelanders think about how the FSA handled this whole issue?
As Marc said , Iceland made it to the news today here in Belgium, the belgian branch of Kaupthing is dependant from the main Luxemburg Office where the Financial Control Administration freezed the accounts after the nationalisation of Kaupthing in Niceland which seems a collateral damage of Brits PM declarations ….
Domino principle at his best …
Besides that , our second national bank (Dexia) is a little bit more national than before …
And how’s the weather??
Hello my lovely,
I thought it might amuse you to read this:
http://www.orchideareflects.com/orchidea/2008/10/10/sippenhaftung.html
Lots and lots of love and I’m thinking of you and wishing you and Iceland well,
o xxx
Ah, Gordon Brown, the PM that nobody voted for (he got the job when Tony Blair resigned, Brown being deputy PM at the time. He and Tony had worked out a little deal that Gordon would get to have a go at being PM without having to go through that tedious general election stuff). No wonder he’s unpopular here in the UK. And the British Government is obsessed with terrorism to the extent of forcing extremely unpopular anti-terrorism legislation through Parliament by any means necessary - they probably took this opportunity to use it so they could say to the people of Britain “Look! We do need it after all, you unbelievers!”, no matter how inappropriate the circumstances. Add that to the general media hysteria and you get the situation we’re in right now. I hope it all calms down before too long. It just seems absolutely crazy. :S
Please allow me to apologise on behalf of the people of England for the Jocks (Scottish) who are currently wrecking my country with their malicious incompetence.
It’s bad enough that we have to put up with them, you have our sympathy that they’re speading their poison to you as well.
Good Luck and Best Wishes from ENGLAND.
Icesave has taken all my money and after days there’s still no clear picture of what’s going on. I applaud the UK government for not taking this shit from Iceland.
Don’t worry about the tabloids (they will never miss an opportunity for a good headline. it is not personal, they do it to _everyone_) or our Prime Minister’s gibes; nerves are frayed as you know and mistakes can be made in such climate.
But for what it’s worth most in the UK feel for the Icelandic people.
Like so many other British people, I’d also like to apologise to the Icelandic people for the actions/words of our unelected Prime Minister.
Nobody ever elected the man, he has no democratic mandate, and we all despise him.
In the UK we all know that he’s a lying bully. The current diplomatic links may well have been torn apart by our current mad leader, but the ordinary people of the UK are sympathetic to the Icelandic people and we hope that our leader does not partake in the theft that he’s threatening.
We do not see Iceland as a terrorist organisation, the only person who does is Gordon Brown because he’s basically a mad lying bullying idiot. We’ll try to get rid of him soon politically, but at the moment it looks like a 2010 election is our only option.
Ad; Didn’t you read the post?
Thank you everyone for your input and especially your support. It is much appreciated in these troubling times.
Ad - I’ll echo Ægir … which part of the above post did you NOT understand?
I agree with “williamdb ”
i think here you, and a lot of the commenters, are confusing the words of Gordon Brown with the reporting of Gordon Brown’s words. The papers are just trying to make stories that will sell… especially the tabloids and Tory papers.
Alda, I have to say respectfully that your prime minister has been very vague about meeting its obligations to Icesave depositors. Check out this interview: http://news.bbc.co.uk/1/hi/business/7658417.stm.
He was asked directly what Iceland would do those that had lost their savings. He said he was glad Britain had taken action to protect the depositors. British and Icelandic governments would need to talk about what happens next. He wasn’t in a position to state what steps he would take to compensate these savers. In spite of prompting he didn’t commit to doing anything at all.
I agree with the rest of your comments, though. In particular about using anti-terrorism legislation to seize assets.
The Icelandic government is being very vague. The Icesave website still gives no information except a link to a UK government site, saying that the UK will help out savers if Iceland doesn’t.
In the meantime, myself and a few hundred thousand others cannot access our money and are dealing with VERY REAL, VERY IMMEDIATE DIFFICULTIES IN CASH FLOW. I AM LOSING MONEY. I CAN’T PAY FOR THINGS. Perhaps you could lend me a few K? Iceland and Icesave should be absolutely crystal clear about what they are going to do. Until that happens, the UK needs to react strongly and aggressively to make Iceland act.
Francis - thanks for the link, I haven’t read it because I have to be very selective right now of what I take in and if I were to take in everything being written about Iceland or what the government is or is not doing I’d be a basket case. From your comment, though, it sounds like the Icelandic PM is being honest - the way I interpret it he probably doesn’t have an overview of the situation and doesn’t know what steps to take. From what I have heard, however, he has committed to fulfilling those obligations - even if it means that the Icelandic government will have to take out a huge foreign loan.
I’m angry at my government and Central Bank and the way this situation was handled and I wish this wasn’t happening. But I also try to remember that these are human beings trying to come to grips with a HUGE problem, there are only 24 hours in a day, and I’m sure they’re doing what they can. I do not think anyone in the Icelandic government or elsewhere is purposely out to shaft anyone. I do think however that it’s easy to look for a scapegoat and to kick the underdog, which unfortunately is how a lot of us here view what is happening.
Ad - you and me both. My money is frozen too. So undoubtedly is that of a lot of other people. There are a lot of us in deep shit right now. Blaming Iceland and the Icelanders won’t change that.
So much for working together to solve our problems. Brown is an utter fool and does not speak for the British people, only himself and his hangers on. He is a sick pratical joke foistered onto the British people by an antiquated system of democracy that desparately needs an upgrade to insure that such an incompetent fool can never again get in and stay in such a position of power with such a small percentage of the population voting for him. Sorry no one actaully voted for him as Pm did they? I’m sure the problems in Iceland could be easily solved in a reasonable manner instead of resorting to rediculous threats and anti terror laws. Lets face it the amount of money involved could easily be found by a gov that spends money faster than it can print it. Whats a few more billions on God knows how much. In a few weeks time the Pound will be worth about the same paper clip anyway.
The Icelandic people aren’t terrorists, The icelandic people have lived a very high standard of living by borrowing UK savers money and then lending it back to UK businesses and taking a sizeable income for themselves through banking charges. The icelandic government have taken tax revenue from these banks. A sizeable proportion of icelandic wealth has come from the hard daily work of british people who put their faith in icelandic management. Icelanders were trusted as intelligent and civilised. They have betrayed this trust. The icelandic prime minister declared that icelandic companies should perform a mass repatriation of assets to iceland. This means taking all of the assets and paying none of the liabilities. This is tantamount to sailing a 16th century war ship cannons blazing up the thames and robbing the gold from the bank of england. it is economic warfare that the icelandic pm declared. it will not go unchallenged
Hi Alda
At least you are not short of subject matter for your blog, like you were a few months ago - remember those good old days? I see that the Scots are receiving some venom on your website too, so Iceland isn’t alone there. It’s quite shocking to see your blog being used in this way. What happens to these blogs, as the comments made here must be history in the making, but will they just disappear for future generations?
guy - which part of the above post did you not understand?
“This is how wars get started, my friends.”
I would have thought you have enough to worry about right now without wanting a war as well…
RH - well, at least the Internet isn’t broken yet, thank God for small mercies.
I guess the blog and its comments will live on until that happens.
Guy: “The icelandic prime minister declared that icelandic companies should perform a mass repatriation of assets to iceland. This means taking all of the assets and paying none of the liabilities. ”
This is just false, and you should get your facts straight.
I can’t express my anger at the British government enough, and I hope Icelandic people don’t assume that the idiot in charge here in Britain represents the views of most of us.
I think they’ve only taken this aggressive stance because they think it’s fine to push around small countries that have limited financial means to fight back.
Instead of compounding the crisis, Brown should have taken a more active role in lending the financial support of Britain to try and secure confidence in the Icelandic banks and currency before they collapsed, and a gradual lowering of interest rates.
Not only might this have prevented nationalisation and bank failure, but it would also have secured all the British money invested in Iceland’s banks - so effectively Britain would have been acting in its own national interest in doing this, to the benefit of both countries.
This just confirms my view that politicians really are utterly incompetent most of the time, certainly no better than the ‘evil’ bankers.
When people are in a bind and don’t understand why, they need something or someone to blame and they lash out.
That doesn’t make their actions any less stupid.
@ aegir. I’ve heard similar reports as did Guy. Apparently, just yesterday your PM said that he is very positive about selling the bank’s foreign assets. The revenues of these sales haven’t been pledged to a bailout of the foreign account holders. As a matter of fact, apart from some vague statements, Iceland’s government has been eerily quiet about refunding foreign account holders. Other quotes are ‘It’s every country for itself now’ and ‘Dear citizens, both in politics and elsewhere it will be important to sheathe our swords’. That doesn’t really sound reassuring. (links added. I hope they’re poor journalism, but if they’re correct, you should: )
Sack Your PM!
http://www.efinancialnews.com/homepage/content/2452076797
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/3153061/Financial-crisis-Iceland-PM-warns-its-every-country-for-itself.html
http://www.telegraph.co.uk/news/worldnews/europe/iceland/3167712/Iceland-bank-collapse-Geir-Haarde-profile-of-a-prime-minister.html
Iceland the place - great.
Iceland the people - great.
Iceland the government and Icesave - acting irresponsibly.
Here’s a snippet from ThisIsMoney.co.uk:
“the Icelandic prime minister issued a statement yesterday saying Icelandic law had been changed so that Icesave customers will be among the first to receive funds from the sale of the failed bank’s assets.
It read: ‘There is a good probability that the total assets of Landsbanki will be sufficient to cover the deposits in Icesave. ”
A “good probability”? That is no guarantee and it mentions nothing about the standard compensation scheme.
The first place I would expect to find reassurance is the Icesave website, but as I said there is still none (from Iceland anyway).
I see nothing to assure me that Iceland will honour its commitments. The Icelandic government and Icesave should be working very hard to provide that reassurrance. With respect, I’m not going to take your word on your blog as assurance (can you point me to a reliable source for any of your claims?). I should be seeing something very clear and unambiguous from the Icelandic Goverment and from Icesave. In the absence of this, the UK is quite rightly taking action to protect its assets.
Brown is just picking on Iceland because it is small and weak and he needs to be seen to be acting tough. So instead of allowing Iceland to attempt to trade their way out he has seized assets in an act of piracy.
Iceland has been just doing what everyone else have been doing .
My fear is that Iceland seems to be the canary in the Mine for the western financial system.
You can be sure that Brown would not be attempting to Bully America to recover the money lost by investors or savers in failing American institutions.
The UK financial regulator approved these banks to take deposits. Brown has been asleep at his own tiller so he’s bullying Iceland to distract from his own incompetence. In Ireland Spain the states Germany, all over the world, the same things were happening.
The difference is Iceland are tiny. The euro is saving Ireland at the moment.
best of Luck to all Icelanders.
bmcd Ireland
I am sad for everyone, Iceland is a wonderful place and has wonderful people too, I have visited many times.
We do not know all the facts. Around the world there seems to be a great levelling up of finances with Iceland first to be hit hardest. I have no idea if it was brought about by poor management, or will turn out to be just one of those things that happened in the crash of 2008.
I wonder why so many large lumps of money were invested in one place instead of spread around. If you have £6 million, surely it is commonsense to put it in 6 different places. The effort must be worth it to spread the risk.
I hope that the special relationship Britain and Icelend have had for so many Centuries will not be ruined, we share the same stretch of sea after all.
Perhaps the Prime Minister’s ship is sinking and he is clutching at fishing nets to try to save his reputation. We will no doubt learn more in due course, but sueing our friends may not always be the best way.
We do need to know EXACTLY what was said and by whom until then it is all hearsay, and speculation with everyone trying to cover their tracks or should that be reputations.
I was a reader for a little while a few years ago and I have been following the Icelandic news with sadness. I visited in 2006 and loved it. I’m going to start reading again so I can keep following this story… thank you for writing about it. People who are taking their fear out on you are just big jerks.
First, a minor issue
Banking is a business which is based on trust, once the trust is gone it becomes impossible for a bank to continue operating, usually at this point the government steps in. In this case foreign savers werent trusting the government either, so it was just a matter of time until all icelandic banks went down. The whole islandic banking system wasn’t sound, thus I dont think its fair to blame the UK for the troubles. If I recall it correctly an icelandic bank (Glitnir and later Landsbanki?) stopped operating for “technical reasons”, therefore it was very likely that Kaupthing was going down as well. Icelandic bank assets were seized all over europe, because governments tend to be very protective towards their small savers, and in my opinion they shouldnt be blamed for that. Imagine it were the other way round, Foreign banks not repaying icelandic savers. Your government would have seized their assets as well.
No doubt a lot of papers will be written about this whole mess, and who was to blame and what could have done better.
In my opinion all this is distracting from the really important question. The question the people of iceland should be asking themselves very carefully is:
“What do we have to do that this will not happen again?”
I think it is quite interesting to compare this situation to the Société Généralescandal in January. How did this happen?
The easy explanation would be: A rogue trader was making unauthorised bets, unfortunately these bets went wrong. Case closed, nothing to see here, move along.
The more difficult explanation would have to ask more painful questions to get the whole picture?
What about internal control? Werent there any in place? Why did nobody notice these trades? Was there collusion involved? and so on
If a government goes bankrupt or comes close to bankruptcy all these painful questions will have to be asked as well. I think it is too easy to say, well right now the economic situation is very bad, it could have been any country, just somehow it happened to be Iceland.
I think there are a couple of points that make the Islandic situation a special case
1) The alarm bells have been ringing for two years, but somehow nobody in Iceland noticed them.
2) Iceland is a functioning democracy and in a democracy there are lots of safeguards to prevent a mess like this. Elections, a parliamentary opposition, an independent central bank, a free press, a court of audit…
3) All these safeguards have apparently somehow failed. Why? I think the most likely explanation was mentioned in a previous post.
>In the future people will ask: How did it happen that all of a sudden it >was OK in Iceland, a dwarf-nation of 300,000 people, and indeed >just perfectly fine, for people to swipe piles of money to stick into >wage deals, severance packages and you name it, and that some guy >could earn in a month the same amount as it took a regular Joe >standing next to him in line at the supermarket 20-30 years to earn?
>Why didn’t anyone here in Iceland ask questions like this? Oh, right, >I remember. The owners of the banks also own the media. The >research departments wrote the questions.
This seems to me the most likely explanation. With merely 300000 people in Iceland somehow a spirit of groupthink prevented anyone in charge to listen to critical voices let alone to ask any critical questions.
Well, what is to do? In my opinion the only way to avoid another situation like this, is to join the European Union and to adopt the euro. Not only will this provide a much better safety net, but also a banking monitoring system staffed by foreigners who are more likely to make a fuss about a banking system going into the wrong direction.
Again only my 2 cents and I am sorry if I offended anyone.
Ad - since you don’t want to take my word for it (quite rightly too - this is after all only a blog) I don’t understand why you are airing your concerns here. Seems a waste of time and energy - and bandwidth.
In other news…. American (and other) children are still dying in the poison sandbox called Iraq. ‘It’s the economy stupid’ my ass, stop the war and maybe the economy recovers.
Nice move once again yanks.
banks create money that does not exist with the “fractional reserve” and all politicians, all over the world are aware.
First time on this blog, and may I say how human and witty it is Alda?
Believe me, there are far more abusive posts from Brits on other Icelandic sites. I loathe Brown and his government, but for once I will defend his action. Given the situation, how high the stakes, and the vagiaries coming from Haarde & Co it was perfectly reasonable to freeze the assets. Nobody was accusing Iceland of being terrorists (though a few hundred whales may disagree) - it was the only means available.
We are in no position to lecture, given the wrecklessness that has gone on here under the nose of Labour. Indebted to the hilt, we do still have the bulk to bail out banks in a way simply not possible by Iceland. This was always the ultimate danger of large banks tiptoe-ing on the pinhead of a tiny economy.
I’ve been spreading my money amongst UK banks, and with respect, had I had a penny in K, L or G, I’d have had it out long ago. That so many millions appear to have been lost by UK authorities beggars belief. All for another 1%.
Never visited the country - tales of stupefyingly high prices from friends who have has always put me off. If the £ is still worth anything, this may change. I’ve always wanted to go - so maybe now is a good time. You produce some great music and some very cool cats!
Just wish you’d stop that whaling!!
Anyone in Iceland know what Bjorgolfur Gudmundsson and his son Thor are up to?
Being a West Ham United fan and what with all this political argy bargy, I was wondering would I be chanting “Gordon Brown’s Claret and Blue Army” at the next match?
I found your blog from a link on the Guardian newspaper website:
http://www.guardian.co.uk/news/blog/2008/oct/10/creditcrunch
I disagreed with your view, so I thought I’d enter the debate, throw a different opinion into the mix. That’s what blogs are about for me. Seeing as you only want to hear from people who agree with you, and don’t want to address my points, lets agree to disagree and leave it at that. Hope things work out OK anyway.
I still find it amazing how fast everything is moving. I can see there is a lot at stake, i just wish the people in power would be clearer about things to prevent further knock-on actions. When millions of pounds are at stake its not surprising things are taken seriously.
One point i’d like to mention is why the Icelandic government are not fullfilling (or at least coming out to clearly say they will fullfill the rules of EEA banks by protecting the first €20,000 of each eligible depositor’s cash in the event of a bank failure. See link below:
http://www.guardian.co.uk/money/2008/oct/06/savings.banks
One important matter on which nobody seems to comment is that Kaupthing’s U.K. operations are/were subsidiaries operating under the auspices of the U.K. financial authorities and as such all compensation is payable by the U.K. authorities. Landsbanki’s operations are /were as a branch office, and therefore liable to regulation and compensation to the EUR 20.000 EEA limit by the Icelandic authorities.
Can someone tell me what part of Brown’s GBP 1-20 billion (I’ve read all sorts of figures) is Kaupthing and what part is Landsbanki ?
To follow Barry’s comment; I’ve just heard on the news here (in Switzerland) that Kaupthing’s Swiss customers (there is just one branch here; in Geneva) are to receive compensation according to Swiss banking regulations, to the tune of CHF 30,000 max. No one is talking about making the Icelandic government accountable.
Gordon Brown’s legacy is a British economy in tatters; given his reputation (deserved or not) for being tight with a public pound, there’s irony in all of this.
More than one person mentioned the Falklands War; I’m reminded of an episode of the 80s sitcom “Yes Prime Minister” when the PM describes an event as something that “could be my Falkland Islands,” and his Private Secretary answers, “Yes, and you could be General Galtieri.”
There’s no question that from a diplomatic standpoint, this was a colossal error of judgment. However, since we’re talking about nearly UKP 800 million in local authority money, it’s no surprise that the escalation rate just spiked. Brown’s use of the anti-terror laws was about as inept as suggesting that this could be resolved through the courts - one is to exacerbate the crisis, the other is to ignore it.
As for the little Englander above who would like to pin this on the Scots: if you lot were better at running your own country, you wouldn’t need to blame anyone up north, would you ; ) You’ll get Parliament back next time, sir, because surely there can’t be a Tory leader inept enough to lose the next general election.
Orchidea, I suspect that’s the difference between individual saver accounts with government guarantees as opposed to institutional investment accounts - so unless, say, the Moray Council put their money into the bank in increments of UKP20,000, that’s not going to help much…
Thank you for clarifying that, Colin. So… hypothetically, did the Moray Council put all its eggs in one basket? And did it have so little faith in the domestic banking industry that it chose to bank with an Icelandic bank’s subsidiary? Or were the Icelandic bank’s conditions just too tempting?
I believe that the local government authorities were provided with guidance - I assume from the central government - that Icelandic banks were a safe bet because of their good ratings with credit agencies like Moody’s, and because of the rate of return being slightly higher than domestic UK alternatives.
As I understand it, the pressure is that the local authorities get their money on a quarterly basis, so while they may not believe that their investments have disappeared, they do have short-term liquidity risks - in other words, they are frozen just as individual consumers are. When you start to see day-to-day government services at risk because of the banking crisis, it’s not hard to imagine the reason that the Brown administration is panicking.
In the longer term, someone’s going to have to pick up the pieces and re-think whether UK taxpayer funds should have been put entirely in overseas accounts, but that doesn’t help anyone at the moment.
I just heard a good explanation on BBC Radio 4 about why the Icelandic assets were frozen. It appears unfortunate that the bill this clause is in has a ‘terror’ label when actually this clause is nothing to do with terror and everything to do with money. However I hope it can all be talked through and sorted.
It is just such a terrible mess, and probably just the tip of a gigantic iceberg which is now rapidly melting. Is this another side-effect of ‘global warming’ that has been hidden until now!
Hey Dave,
here is the problem with the icelandic banking system. It only got de-regulated and privatised in the 90’s, before that they were STATE OWNED! That meant that the government controlled the banks from within. With the privatisation came a regulatory body to oversee the banking, but the banks grew way faster than government could keep up with. In a small country that was expanding so quickly it can sometimes be hard to find skillfull people for the right jobs. And the qualified skillfull people in the field of economics could make a lot more money in the ever expanding (and expanding and expanding) banking world. Icelandic banks came up with constructions that were hard to oversee for the government. As early as 2001 there were articles in the British and Scandinavian press about the troubles that the Icelandic controlling parties were encoutering (this is also where the stories of the influence of the Russian mafia and the Cayman Islands accounts come from) . Even big institutions like the F.B.I, who are now investigating Wall Street bankers, have a hard time finding capable accountants to unravel the structures set up by financial wizards. And in Iceland it was even harder with all this new found wealth. It takes a certain individual, who is willing to take a 75% pay cut compared to the private sector, and in modern day Niceland that individual is hard to find….
Freezing Icelandic assetts seems like an outrageous over reaction that will ensure that the financial situation in Iceland becomes even worse no? Sounds very self defeating considering Gordy wants cold hard cash.
The use of laws passed under terrorism act is especially worrying. We always knew those laws would be misused, but how bizarre to have them misused against Iceland!
Alda,
This is a bit of a personal post, but hope you won’t mind.
Many people across countries are going through a rough patch - whether it is losing 401(k), doubled mortgage rates, frozen bank accounts, lost jobs etc. Yet there are many people in Iceland and out (look at CR blog for example), where people still keep a sense of humor and don’t discourage alternative points of view.
You might want to reconsider your response to people who don’t agree with you :
e.g. your comment to Ad who lost her savings in an Icelandic bank account: “don’t understand why you are airing your concerns here. Seems a waste of time and energy - and bandwidth”
It just puts people off - and the most interesting part of a blog are often the comments, not necessarily the commentary…just my two bits.
This post and most of the anti-British comments are based on a falsehood. The Icelandic authorities are only honouring their banking guarantees to Icelandic citizens. If you know otherwise please provide a link to reputable news source to back up your claim.
As a Briton with accounts with both Icesave and KaupthingEdge I was very worried when I read on the BBC News website that
‘ “The Icelandic government, believe it or not, have told me yesterday they have no intention of honouring their obligations here,” said Mr Darling.’
(http://news.bbc.co.uk/1/hi/business/7658417.stm)
That seems pretty clear to me, and I’m glad that Britain invoked the RIP act to prevent would have been a criminal act by the Icelandic government. Having said that I do have great sympathy with the Icelandic people. It appears that a failure of proper risk management by the banks and proper oversight by their government will leave them with a burden of debt that could take many years to pay off.
I must say that I actually do understand some of the concerns raised by Ad.
I tried today to find out what information has been given to Icesave depositors and it is very little.
Simple questions like when, how much, from whom, how etc. are very hard, or even impossible, to come by.
I think our government (the Icelandic one that is) could have spoken more clearly from the start.
Having said that….Mr. Browns reaction is way over the top and has in no way helped matters. Probably made it worse….
C’m on Kolya, the comments here are not anti-British , but anti-Brown. Both you and Gordon need learn to read between the lines! From everything that comes out of Iceland it is perfectly clear that they are doing everything in their power to ensure that they can repay what is owed. In order to do that they need to sell off what assets there are left. however, if the government of Iceland would come out and say that, you might just well put up an “everything must go” sign and may find itself forced to sell at well below the market price, thus not recouping enough to actually fulfil their commitment.
Sometimes in an international crisis it is better to whisper than to scream. But as Gordon Brown is slipping in the British polls he screamed “wolf” to save his own skin!
ino, I didn’t express any judgement about the way Iceland is handling the crisis. I’m merely pointing out that your government has explicitly guaranteed the *full* deposits of Icelandic citizens, but is apparently not standing by the £16,000 guaranteed that *all* private depositors are legally entitled to.
@ Ino
From everything I’ve read coming out of Iceland I hear that the Iceland government is doing what it can to repay Iceland residents. If there is anything left they will honour their debts towards foreign savers.
The ‘everything must go’ sign was set up when the PM announced the loony currency peg.
Assets will be sold at low prices. Mostly forced sales by angered foreign governments. That could have been avoided, if the PM had asked the foreign governments to assist in the assets sales they were planning anyway, but giving priority to the debtors of the nation where the assets reside (or something similar). That would have given confidence. Instead your PM announced that most of all the savings of Iceland residents are safe, and if we don’t bankrupt ourselves, there will be enough for foreign savers too.
That said. Browns language was despicable.
Alda,
Just a note to say that I greatly enjoyed your radio interview.
To both Kolya and Dave,
like i said “read between the lines”…. PM Haarde can not come out and say that “yes, we will just sell all assets tomorrow and you will get yer money back”, because all interested parties would wait a few days longer for the water to rise and the prices to sink…. The PM did, on several occasions say that Iceland would honour its obligations. (btw, under any bank scheme, that is only the first £16000, even in the UK of 2 weeks ago). During the unfolding of this Greek tragedy in 3 parts the Icelandic government asked for help from its allies (as far as 3 weeks ago) and even publicly stated at a press conference that the help of the British (and Dutch) government would be greatly appreciated. i.e Please give us some breathing space to sort this mess out. But what does Gordon do? He puts some terrorist laws into effect and starts screaming that he is going to sue Iceland? Rather than communicating through diplomatic channels with the Icelandic government to offer his help and support, Gordy does an interview with the BBC on a train with his sleaves rolled up and shows the British voters how tough HE is! Lets be honest, if this had been a German, French or American bank we would not have seen the same actions from the British government. the British government would have been all to willing to come up with a credit line to tie the bank over. The end result will be that indeed the Icelandic government may have to forfeit on its obligation and not out of bad will, but because your prime minister cared more about his own reputation than about English savers!
I have a huge amount of sympathy for the ordinary people of Iceland and what they now seem to be facing and as a Brit I apologise for the heavy handed way our politicians have dealt with this. What can I say they’re politicians it’s what they do…
However it does seem like people in Iceland still haven’t realized quite what a corrupt country it had become over the last few years. Did people really believe that you can magic money out thin air?
It seems that there are a handful of Icelanders who have been personally responsible for the problems you now face. I just hope they are brought to justice.
Take a look at this for instance:
http://uk.youtube.com/watch?v=GSZqqnSdw44
Ino - amen! With all due respect to all previous commenters, this is the best I’ve seen on this post. I think you’ve nailed it.
John and more people here, a lot of us HAD realized this, but our words of warning were not heeded. The left party here has talked about this - money, or rather value doesn’t grow out of nothing, there has to be something of value behind it, it’s no better than free printing of currency. But no, they were backwards, didn’t understand real money, blablablah. (Haven’t heard this ridiculing of my party for the last 2 weeks, weird!). Also a few economists have spoken out, openly and loudly to no avail. Or maybe rather: Well, yes, you’re right, but let’s just make a couple more trillions, and THEN we’ll stop.
Sad thing is that Kaupthing was the only bank that actually had heeded the warnings and had been preparing itself for years (or so my brother-in-law, who was pretty high up in Kaupthing Edge assures me). It might have been in trouble, yes, but which bank in the world now is in no trouble. What kind of civilized country does, when one bank goes down, size another one and drown it, by expecting it to come up with all the money it owns in 10 days? And this bank was partly even covered by British government insurance, not Icelandic, just like loads of other banks in Britain.
My parents lost about 35.000 pounds sterling, which they had invested in Kaupthing stock, their life savings basically, (fortunately they have a bit of money in other places), they aren’t investors-by-trade or anything, just normal people, a music teacher and an electrician who have always lived sparingly. This money they won’t get back, thanks to Mr Brown and company. That doesn’t mean that I’m not sorry about the people MAYBE losing their money on IceSave, because I am. Just maybe you people should wait for a little bit, before lashing out, there is a definite possibility that you will get most or all your money back. Does it do a world of harm, waiting for a week or two to see if the matters will be sorted out, as our government is trying to do?
I’m basically rambling here, sorry, but our knot-in-the-stomach just grows bigger with all the acerbity, I hate being on bad terms with the Brits, and though I definitely realize our banks were foolhardy and their owners totally greedy, I’m very hurt by this treatment and, it seems, deliberate misunderstanding by the British government.
I do understand the Icelandic idignation at the UK Government’s handling of this. But you need to get real.
Another week and another sticking plaster would not have saved Landsbanki or Glitnir. Kaupthing is possibly unfortunate, but innevitable.
You are in the eye of the storm, but we’re not far behind. Until the Icelandic failures, no depositor had lost anything in the UK, and although refusing to give a blanket guarantee, the government were desperate to keep it that way. Every vibe coming from your government was “we asked you for help, you wouldn’t so we going down and it’s every country for itself”. And that as much of the banks’ foreign assets were to be repatriated as soon as possible. Maybe there was a misunderstanding, but the facts are there to see, no matter what the intention.
It’s blatently obvious Iceland will not be able to meet it’s obligations, no matter what are considered obligations or not. The UK is in a pretty desperate situation itself, and to freeze the assets was the right thing to do. The Language was unfortunate, I grant, but the action was taken and now is the opportunity to talk.
Quite how, if agreement isn’t reached, the UK government will legally liquidate the frozen assets I’m not sure. We’ll cross that bridge when we come to it.
Dave;
“Imagine it were the other way round, Foreign banks not repaying icelandic savers. Your government would have seized their assets as well.”
First of all, Kaupthing wasn’t bankrupt, they would have probably survived this credit crunch.
Second, if Bank A from Britain would have gone bankrupt in Iceland leaving Icelanders worried about their deposits, the Icelandic government would NEVER (hardly any country besides UK, Venezuela and Zimbabwe etc.) freeze the assets of Bank B just because Bank B was from Britain, leading to the collapse of Bank B aswell. And now they are talking about freezing the assets of every Icelandic company located in the UK!
Martin;
“Anyone in Iceland know what Bjorgolfur Gudmundsson and his son Thor are up to?
Being a West Ham United fan and what with all this political argy bargy, I was wondering would I be chanting “Gordon Brown’s Claret and Blue Army” at the next match?”
They are probably spending the IceSave deposits profit on luxury items and pouring it in to West Ham. They were the majority shareholders of Landsbanki and therefore also IceBank.
I really can’t understand how people can blame the Icelandic people for all of this. The majority of the Icelandic people didn’t have anything to do with all of this lavish lifestyles of the super rich. Most of us have been struggling to live a modest life, although I must admit that a lot of people lived above their needs, but not everyone.
And the funny thing is that the men that invested the uk deposits into shady investments are all living the high life in London, not Iceland, why aren’t you angry at these men instead?
Icelander,
Only complete idiots blame the Icelandic people, and there really isn’t that many of them. A clique of financial bandits have ruined you, and we have our own too of course.
The only winners will be the litigation lawyers.
These comments are getting heavy. And to be sure, these are grim times. But, Alda, I hope you get to talk about other things in the coming days and weeks. I stumbled across your blog because of the economic crisis, in the way these things happen. I read further and found it fascinating and beautifully written, too.
For what it’s worth, the weather is beautiful here in Scotland and I’m heading out.
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