I must confess I am somewhat taken aback by the support for the President’s decision in this space.
Why, just a few short weeks ago, comments such as this one – penned by someone who called herself “Alexandra” – were the norm:
Iceland ’s thieving bankers, in collusion with Iceland ’s corrupt government, elected by the complicit Icelandic people, abetted by the worthless Icelandic media, and pimped by the amoral Icelandic President, stole billions from other nations. Your collective efforts (yes, collective, because despite your claims to the contrary, all of you were involved) destroyed lives and bankrupted charities that once provided relief for the poor, the indigent, and the disabled.
One year after the fact we have yet to see a single word of apology, or contrition, or remorse. Instead we get whining, complaining, and protestations of innocence. Your criminals and their enablers still manage your banks, run your media, sit in your government. You and they obviously feel no shame. Having raped us and bloodied us, you now tell us:
Forget the charities, forget the indigent, forget the poor. “Tiny, little Iceland ” is the truest victim. Tiny, little Iceland is pursued by creditors. Tiny, little Iceland is slandered by bullies. Tiny, little Iceland was unaware. You are not to blame. None of it was your fault. Your leaders fooled you. Your media lied to you. And your ignorance absolves you of guilt.
We, the victims of your crimes, may not be the smartest, the hippest, the wealthiest, the most beautiful people on earth, (as Icelanders so often claim to be). But we have our ethics. We value modesty and we honor truth. And as we read your excuses we see, from afar, an arrogant, self-absorbed, deluded little nation, wallowing in their latest lie.
You have lost our trust. You will never win it back.
At the time, readers jumped all over the comments section to agree with the statements above while the stick-it-to-the-EU-and-IMF crowd were conspicuously absent.
My my how swiftly the tides turn.
{ 27 comments… read them below or add one }
So much posturing seems to be going on. I have just read an article on the Guardian web site stating 90% of the debt can be met by the
sale of the Landisbank assets. If that is true (could this be correct Alda?) then surely it is a key aspect of resolving the scale of any future debt that the Icelandic people face. Especially when you couple this with the fact that payments won’t kick in until 2016 and are spread over, I think, 14 years.
sylvia from viking wirral
True. But no one knows exactly how high the value of those assets is. However, this just goes to show how this whole Icesave issue has been twisted and turned and manipulated beyond all recognition.
The opposition has used it shamelessly to try to bring down the current government. And after voting AGAINST a referendum on Dec. 30th, the leaders of the Independence and Progressive Parties did a complete turnaround today and say they do NOT want a referendum.
That said, the Icesave agreement stipulates that interest payments on the loan will not come out of Landsbanki’s assets, but will be paid by the Icelandic taxpayer. Those amount to billions of krónur per year.
There are definitely many aspects of the agreement that constitute a raw deal for Iceland. The question is which of two BAD options is worse – to reject or accept the agreement.
Referenda are good for yes/no questions e.g.
Should Iceland join the EU? YES or NO
Should Iceland pay the Icesave debt?
YES or NO
It is not useful for nuanced questions of debt, finance, international relations or diplomacy.
Then there is the question of referenda – binding – or plebiscite – consultative and non-binding.
The government of Iceland needs to get a grip on this, decide referenda or plebiscite and choose the wording carefully.
The government is within its rights to ask for a mandate to renegotiate the terms, length of repayment and interest.
That would strengthen the government vis a vis the UK, Holland, EU and IMF.
But first the decision to pay or not pay has to be balanced against the short, medium and long term consequences of either choice.
If this is correct, the people of Iceland should ask their politicians why nobody noticed this before! Here is that Guardian article:
“Failed bank’s assets may pay Icesave bill”
http://www.guardian.co.uk/business/2010/jan/07/iceland-president-warns-uk-government
“The burden of Iceland’s debts on its taxpayers could be a fraction of previous estimates after it emerged that most of the bill could be paid from the sale of assets owned by one of the country’s failed banks. Assets owned by Landsbanki, which collapsed in 2008, are valued at 90p in the £1 and could pay off most of the £3.4bn owed to Britain and the Netherlands, which compensated savers in the bank’s Icesave business.”
The thing that I find unbelievable about this entire process is how everyone seems to misunderstanding what is going on. There is currently an article up on Radio Netherlands Worldwide, the Dutch state international news service titled “Iceland Defaults On Dutch Debt”.
WTF?
Alda.
On Dec 39th the opposition voted FOR a referendum not against it, as you obviously mean to say.
Good that you have that referundum every loyal icelander must vote nein and refuse to pay the brit/dutch system a single penny and therefore bring about the collapse of the entire icelandic capitalist system and all those hardworking business success property owning types (yawn) can go to icesave, fear not they did get wrapped up on a beach at dunkirk in a previous era, sorry to be racist and bigotted but I dislike hardworking successful people, why cant I be one of them ?..ha ha.
I remember that girl
And I just ignored her – as the best way to deal with such mentally unstable person.
But I didn’t get your comment
I’m not in any particular camp, although you may get the impression that I am an IMF and EU basher. Just this morning I was thinking it might be time to start trying to re-brand the EU by referring to it as the FE – Fascist Europe! Don’t get my wrong, just this morning I was getting misty eyed about about the old country and all my relatives on the continent. Then I had a cup of coffee and snapped out it!
Cheers
Update Alda more learned comments than I on
http://www.independent.co.uk/news/world/europe/an-island-in-the-age-of-austerity-1859948.html
Threads drawing Iceland together with Germany WWI and general agreement why does not someone go after the cash that seems to be coming from somewhere for data farms ? Get Eva whats-her-name on to the job before they get onto Iceland but of course that would take a revolutiona, that never happens in the real world,we suck up to NAMA and you will suck up taxes till 2035
Icelanders brave and courageous unlike us
http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-iceland-shows-importance-of-putting-people-before-banks-2000578.html
Isn’t the stick-it-to-the-EU-and-IMF crowd widely absent today as well? In many comments the President’s decision has been interpreted as a blow against the EU and IMF and whatever evil institution there are. He is often seen as some kind of folk hero, giving a voice to the ordinary people. What a misconception, I think!
My impression of this is one of a power game – very inward-looking, kind of scorched earth tactics and somehow irresponsible in regard to Iceland’s international reputation. There may be some understandable support and sympathy for Iceland among the international community, seeing this as a David vs. Goliath affair and relating it to their frustration with their own politicians. But I think, it is not perceived well among the relevant decision makers in the world.
And those comments, stating that, of course, this referendum had never been intended and should not be interpreted to be a vote against Iceland’s commitment to pay its debts, did never show up before the President’s veto. This makes them appear like a spin and rather insincere and the whole petition rather questionable as apparently many people had signed under a different premise.
But I am somehow lost in regard to the new turn of the opposition parties. They apparently did not expect this veto and seem to fear a precedent for the future, should they get back to power. In this respect the presidential veto might be seen as a clever move – but then it would nevertheless be a power game, misusing the Icesave issue.
Or, maybe, the most important thing for the opposition parties is, to keep the Icesave mess running as long as possible in order to distract attention from other things. And calling for withdrawal of the latest bill and renegotiations would leave the current government in charge to be blamed and obstructed by the opposition – scorched earth.
…Um, sorry, I may have misinterpreted the “stick-it-to…” phrase. But I think, there have always been people ready to critisize the EU and IMF. You don’t find many comments pondering about the pros and cons in the dealings with EU/IMF in an unbiased and impartial way.
Dragging the UK and NL into a loan dispute is unfair – why are the interest payments that Iceland has to pay of any relevance to those countries. The Scandinavian countries were supposed to provide backing to the Icelandic banking system is there was a collapse …or so the banks claimed. Shouldn’t a loan be forthcoming from those countries to pay the Icesave debt? why isn’t Norway bailing out Iceland?
The fun part is that the main difference between the first Icesave law and the second is mainly about whether the government guarantee ends on 2024 or not. But as Sylvia pointed out, with the sales of Landsbanki assets the Icesave debt will be long reimbursed by 2024, even possibly by 2016.
So there is no real issue behind the referendum apart political ones.
My guess is that the government won’t hold the referendum, but instead will once again renegociate the agreements. They should appoint Magnus Arni as chief negociator, this time he won’t be able to say that the agreements are not fair…
We all know that person with integrity that pays whatever he owes, and the other that makes endless complications, delays and excuses.
The Danes are now questioning if Iceland will ever honor its debts?
Despite the debate, there will only be one conclusion for years to come. The damage in reputation and loss of trade, will be far greater than a bad agreement with no payments for 6 years.
The IP & PP politicians were rich or had their debts written off, so the kreppa is just an inconvenience. The citizens will continue to bleed.
In the nicest possible way, it seems: you’ve complained about the President’s decision. You then complained about the process that gave him the veto (after the icesave bill passed by slimmest of margins). Now, you’re complaining about people who express views in support of the President (from in/outside of Iceland).
Well nobody is going to accuse you of sitting on the fence.
Socialism, the EU and riding roughshod over, and asking taxpayers to pony up: are you sure you’re not Euro MP ?
Interest payments on the loan….
I am no expert in finance, but I suggest that if you are able to pay off 90% of the debt with the Landsbanski assets, then the balance remaining is a loan of 10% of the debt. Surely it will be against this balance that repayments would/should be calculated? The Guardian article suggests that the repayment would come down to 500 euros per person. Icelanders have the right to feel that even this is too much, but I suspect that the scene may not be as bleak as it is being painted. Thanks to the actions of a handfull of greedy Icelanders- bankers, business oligarchs, politicians, your economy is now bankrupt. You need Nordic and IMF loans to keep on paying the social bills, restore business confidence and re-build a new economic framework. I don’t blame you for doing all you can within this mess in trying to get the best deal possible. But I do know something about taking on Governments-we tried it in Liverpool in the 1980s and it’s taken us 25 years to recover.
in solidarity, sylvia from viking wirral
Alda does an amazing job of presenting all sides and not censoring.
Anyone living in Iceland know that it talks like a duck, walks like a duck, but is anything but.
You have incredibly destructive people like Hannes G who get near the reigns of power – wreak havoc – then get a cushy university job, and write garbage that is completely dishonest and misleading.
The value of this blog is exceptional.
Firstly Peter – London, what on earth makes you think that Norwegian taxpayers should pay for private Icelandic banks? Why should Joe Sporticus the average Scandanavian taxpayer have to stump up because some Icelandic bankers failed? Thats crazy.
“We all know that person with integrity that pays whatever he owes”
Good, because I don’t see how the average Icelander owes Icesavers.
I’m based in the UK, I saw the Icesave adverts, frankly , even a simple amount of investigation led me to believe that it was terribly flawed. A bank account with more risk than emerging market debt.
And here it is, I’m sorry but people in the UK and Netherlands went chasing yield – without knowing what they were doing – without understanding risk .
I’m sorry but taxpayers shouldn’t be bailing out the ignorant, or plain stupid, you make the investment decisions and you live by them.
Sorry Peter Reeves, but asking other people to bail out mistakes you may have made is simply wrong.
Thanks for the comments, everyone!
And as eiríkur pointed out, I meant to say the opposition voted FOR referendum on Dec. 39th. Or 30th, as it were.
As for the Landsbanki assets – indeed it has been speculated that a large part of the debt will be covered by those. However that’s a bit hit-and-miss because a bank’s “assets” are, essentially, what they have loaned out. This is why the debt cannot be paid instantly – because the loans have to mature over a number of years. And the global economy being what it is, no one knows just how much of those assets will be recovered, or what they will be worth.
That said it looks more and more likely that a large portion of the debt WILL be recovered in this way, which is why it is insane how much time is being devoted to this issue IMHO. Not the mention the havoc it will wreak in terms of Iceland’s reputation and credibility if it is rejected in a referendum.
Joerg – your first comment is spot-on. The opposition is waffling and has done a 180-degree turnaround. Which just goes to show the exact nature of their Icesave stance.
Michael Lewis – not an Euro MP, no. God forbid.
— but as I have always said, it is pretty impossible to have a black-white position on this issue and it is easy to be swayed by the various arguments.
Hi all
Let me explain a little about how things work in regards to interest payments etc..
Even if the assets of Landsbanki will eventually cover 90% of the Icesave debt the interest payements are not included in the 90%. The principal will not be payed until the assets are sold and all legal issues resolved. This can take years. 10 years is not unusual when liquidating a failed bank.
And all the while interest will accrue on the Icesave debt and will eventually be payed by the Icelandic taxpayer. In fact….we already owe a whole years worth of interest (at 5,55%) on the full amount.
Here is Patrick , one of my favorite bloggers. He missed the Terrorist Legislation from the Red Coats . Iceland is gathering very strong support for giving the middle finger on this whole thing. I flipped out with joy when Grimsson did this. I have lost all respect for Brown. He is mentally unstable and a drunk.
http://patrick.net/forum/?p=27754
It’s time to rename Icesave ICESLAVE.
With regard to the size of the Icesave debt.
We know with some accuracy the amount that can be recovered from the ruins of Landsbanki.
In the settlement between the new and old Landsbanki banks, the new (functioning) entity has agreed to pay 260 billion ISK for the assets it has received. In round numbers that is 2 billion USD. This can be deducted from the Icesave figure of 5.5 billion USD immediately – that bond exists it has a value and it has been agreed. So the maximum exposure to Iceland is 3.5 billion USD.
But the settlement between the old and new banks excluded assets held outside Iceland. Those are still held by the old bank. The most conservative estimate of those assets is a billion USD. In reality they will be higher. But let’s stick with the one billion figure. That means the absolutely maximum exposure to the Icelandic state for the Icesave debt is 2.5 billion USD. In round terms that represents 20% of the GDP of the country, so it is in fact a very small contribution to the overall debt of the country (something in the region of 4-5% : I calculate that number from the 120% of GDP of government debt and 300% of GDP of private debt). The Sedlabanki in fact quotes the Iceasve exposure at 20% of GDP in its latest Monetary Bulletin (see page 40).
All the heat and anger being generated in Iceland is a purely political and media phenomenon being used to whip up the population.
If iceland were to accept the existing Icesave deal then the country would have a seven year grace period to choose the timing of the sales of the Landsbanki international assets – in effect the country will have seven years to see a recovery in the value of those assets. As others have suggested it might be relatively easy to recover an amount to cover all the Icesave debt in that timeframe. If Iceland rejects the deal (and its generous 7 year non-payment period) then those assets will need to be liquidated immediately – at a very poor price and a guaranteed exposure to some debt.
Really, the population is being led by the nose to make a very poor financial decision – and the reason is purely political.
(By the way Alda loans can be packaged, securitised and sold on – you can always recover the NPV of an ongoing unpaid debt, no need to wait until the loan matures. The Icelandic banks did this quite a lot with Icelandic mortgages – they packaged the mortgages together and issued “Covered bonds” which they sold to foreigners. These covered bonds can be traded like any other financial instrument. This is one of the complications with mortgage relief in Iceland – the money isn’t owed to Icelandic institutions but to foreign ones. Those foreign instituions hold perfectly legally documents entitling them to the payments made by Icelandic mortgage holders, and if those peple default their property falls into foreign ownership – usually indirectly through the foreign ownership of the Icelandic banks. Any mortgage debt relief must be paid for by the Icelandic government, i.e. tax payer.)
To Cactus Zonie
A bit of moderation please, we’re all upset and angry, but your following statement – I have lost all respect for Brown. He is mentally unstable and a drunk – will get us nowhere in this debate. Let’s keep the discussion at a civil level and one that is generally respected on this excellent blog.
Just catching up with Iceland news over the past few days. A good comment from Mike that puts Icesave in perspective, but I wonder if Icelanders who’ll vote in the referendum appreciate that perspective.