One of the great perks of this depression and indeed of writing this blog is that I’ve had the chance to meet so many new people, both virtually [online] and in Real Life.
Last Thursday, for instance, myself and Eygló, who edits the Iceland Review website, got together with a woman named Lesley Riddoch, a Scottish broadcaster and journalist who runs her own production company, the aptly-named Feisty Productions. She was here to take the pulse of what was going on, particularly with reference to what is happening in her own country.
As many of you will undoubtedly know, a few years ago Scotland received autonomy and now has its own home government. There is a definite push for independence in Scotland, and the Scottish National Party has often pointed to Ireland, Iceland and Norway as “The Arc of Prosperity”, countries that have done extremely well as independent states, the argument being that Scotland, too, might join that arc by becoming an independent nation.
Or … um
The arc is not so much an arc any more, but more of a straight line.
Something which, evidently, the UK government now takes some satisfaction in pointing out to the Scots, as in: “Just look at sad old Iceland now … if you’d gained independence, you’d now be in the same sorry state, your banks going down the tubes with nobody to bail you out, nyah nyah.”
So Lesley decided to take a wee trip over here to find out if, in fact, the Nicelanders are now crying the blues over breaking away from Denmark all those years ago – our former colonial masters, to whom we might now run like little kids to hide behind mommy’s apron. To which the short answer is: HELL NO!
Something which she found rather remarkable, I daresay.
Anyway, Lesley and I got on like a house on fire; after our interview we headed on down to Vitabar for a yummy greasy burger and then to Cafe Paris for a coffee, and discussed, among other things, the genius, power and magic inherent in being bold. And on Saturday, like a real trouper, she cancelled her proposed tour of the southern Icelandic coast to attend the demonstration on Austurvöllur – which incidentally was great – super turnout [8,000 people, claims Fréttablaðið] with a zealous, yet eminently rational, mob. And promised to send me a podcast of the whole thing, which I shall duly post on this blog [that is, unless I came across as a wiped-out zombie desperately in need of a proper meal, which is precisely how I felt. Ahem.]
ALSO.
The Icelandic authorities today reached what was described on the RÚV news as a “preliminary agreement” with British and Dutch authorities on the Icesave dispute. From what I can ascertain, Icelandic taxpayers will compensate depositors in all Icesave accounts according to EEA law – over and above what Landsbanki’s assets won’t cover. So hopefully we can breathe a big sigh of relief and all be friends again.
IT’S LATE AND I SHOULD BE SLEEPING ON MY GREEN EAR*
But I got up so late this morning that it’s still all systems go – even despite the wicked punch I drank last night at a friend’s birthday party. Who knew vodka, white wine, Sprite and canned strawberries made such a stellar combo? Right now it’s raining and windy and temps are 6°C [43F]. The sun will rise at 10.01 and go down at 4.23.
* Nicelandic idiom
{ 19 comments… read them below or add one }
Ahahaha. I hadn’t even though about the possibility of going back to Denmark – needless to say the idea is ludicrous.
The straight line of prosperity, eh? I must admit that it’s a major attitude adjustment not to think of Iceland as Teh Great anymore. But, I guess it was time for us to come down off our high horse. Hopefully when the prosperity returns it will be on real terms.
I heard that the main Icesave principles have been agreed (ie the original obligation will be honoured), but the terms (payback period, etc) are yet to be finalised. A pity it took Haarde etc so many weeks to make the main obligation decision, but at least the IMF loans can now finally be approved. A big remaining unknown is what will happen to the kroner when it finally floats freely – I suspect Icelandic holidays will become a further 10%-20% cheaper…
UK unionists are indeed making a meal of what has happened in Iceland (and to a lesser extent in Ireland) because of the SNP’s big emphasis on the arc of prosperity. From an Irish viewpoint independence and self-determination is not about economics. Despite what has happened economically in recent months Iceland remains an example of how a small country can preserve its language and culture in the modern world.
The currency spread is slightly worse today. Free market 284/1 vs 171,5/1 official rate. I would have expected the opposite, but maybe we need more patience still.
I remember seeing a documentary about Iceland saying that they’ve gone from mud-huts to a super-modern society in 50 years. Amazing when you think that a modern city like London (where I live) still builds new houses that are drafty and public transport that refuses to work properly even if it’s new. This horrible crash will dissipate eventually and I bet it will leave some scars, but won’t knock your country out of the Arc for long.
I’m all for Scottish independence, they should have had that years ago. It’s cuturally and economically totally different from England and Wales and would be a valuable, separate member of the EU if they chose to join.
The debate in Scotland about union versus independence has been rumbling on since 1707, when the union with England was created. The heads against hearts arguments have changed remarkably little over that time: unionists typically claim the heads while the Jacobites/nationalists appeal to the hearts.
Alex Salmond’s “Arc of Prosperity” was an attempt to grab the practical benefits argument for the nationalists and hopefully win over some of the sceptics in the middle. In light of the Icelandic experience, the argument blew up spectacularly in the face of this most pompous of politicians (albeit a giant in the talent-free gene pool of the Scottish Parliament). With a financial services industry that is orders of magnitude bigger than that of Iceland, the meltdown in an independent Scotland might have been ghastly. But in truth, the “Arc of Prosperity” and subsequent insolvency are shorthands for the bigger arguments I have described. Scotland is where it is at the point when the shit hits the fan and has to deal with the situation accordingly. Just as Iceland is doing now.
It looks like this economic mess is not going to affect Guðny!
http://visir.is/article/20081117/FRETTIR01/801643099/-1
Roy – Guðni. Guðny is a woman’s name.
Vodka and wine is such a lethal combination!
“Poverty arc” is perhaps a better way of putting it.
“Icelanders become one of the most debt-bound countries in the world after the actions of the government this weeek,” says the newspaper. Every Icelander now owes on average 1.4 million kr, or about 25,000 pounds. And that’s just for the Icesave affair. Throw in another 25,000 or so per capita for the new IMF loan. Did I mention the 5% interest? Or how about the remaining debts of the other banks?
In the meantime, Pétur Blöndal alþingismaður urges everyone to save more and pay down your loans as much as possible. Thanks for the tip, Peter!
And Valgerður Sverrisdóttir, chairwoman of Framsóknarflokki, when asked if the privatization of the banks was a mistake, replied, “I wouldn’t say that … it seemed like a pretty good idea at the time.” Valgerður, you get the Hindenberg/Space Shuttle Challenger award for today!
If there were someone in the UK or the Netherlands who said I could be his friend if I paid him GBP 25,000, I would say “thank you very much, I don’t need that kind of friend.”
Evidently your national leadership thinks differently.
Where will they get the money?
Curious to hear about what was discussed at NASA last night!
I’m assuming that the recent loans Reykjavik has received will assist with the Icesave compensation. As for the SNP, the party had not done the best job outlining the economic benefits of Scottish independence and will have a much more difficult time with that area now!
John. From the failed bank. Forgetting for the moment the timing of the payments (i.e. whther the Icelandic government takes a loan to pay the guarantee or waits for the banks to be liquidated first), the assets of Landsbanki will cover the guarantee. Even if they don’t (which would take a write down of >50%, I believe), the exposure of the Icelandic government will be minimal as they’ll just have to pay the difference.
Not that you’d know that from reading many of the articles by Icelandic professors/central bank board members.
@ Bromley86 – the bank’s assets will cover the compensation in the best of all possible worlds. However, I think most people here are reluctant to believe that this could be so, and in any case it will take years to fully liquidate the banks.
@ Marc L. – there was a panel with some of the media heads here in Iceland and they were harshly criticized for their (non-) coverage of the lead-up to the banks’ collapse.
@ John Haskell – the money for what?
Blromley86, where did you get your calculations from? I know Björgólfur told the assets of Landsbanki worth more than the Icesave debt but that’s not enough for me. The last information I have is that no one knows for sure:
http://newsfrettir.com/?p=399
Bromley-
Under any scenario there would be a time lag between the demanded payment to the NL and UK depositors (immediate) and the liquidation, hopefully at top dollar, of Landesbanki assets. The minimum gap is US$2 billion- $8 billion of deposit guarantees minus maximum $6 billion of multilateral lending.
The only other way to get funds would be to print ISK. I’m not sure what the ISK money supply is right now but I’m pretty sure that printing the equivalent of US $2 billion puts you into Weimar-style hyperinflation as no one wants to hold ISK – the new money will go straight into the market for goods. (IMF suggestions that raising interest rates to 18% will create demand for ISK bonds is too stupid to waste time on.)
Those who ignore history are doomed to repeat it. When the Russians were in the same situation in the fall of ’98 they told the IMF to bugger off- they were not going to plunge the country into hyperinflationary chaos to settle foreign creditors. Ignore that experience at your peril.
Hi guys. Yes, I was basing my comment on Bjorgolfur’s statement that the assets cover the deposits, even if the assets were written down to 50% value.
If you use the figures below it initially looks like there needs to be 100% recovery to meet the deposits, but as Doesn’t matter’s link notes, many of the deposits were either more than 20k euros (this excess being covered by the UK) or less than 20k euros.
http://icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=315396
Anyway, despite the asset sale, the government is going to have it’s long-term debt increased (because half of the assets are Icelandic and have been moved into the Newbankis). But that was going to happen whatever the scenario, excepting the one where the government actually stole those assets from the Oldbankis prior to liquidation.
Eek. Sorry for the shouting
.
money isn’t real