So, the foreign press is converging on Iceland these days, all in anticipation of this Saturday’s Referendum That May Not Be.
And, you know, with all due respect and everything [because of course I have been in touch with a number of you - hi!] all this attention does seem a bit bizarre, considering that a] the referendum may very well be blown off at the last minute and b] even if it isn’t blown off, it will be pretty meaningless, for reasons previously stated.
For the life of me I can’t get a handle on what the freaking negotiating committee is up to these days, ricocheting back and forth between London and Reykjavík, allegedly standby in case someone wants to reopen talks.
Meanwhile, the Faculty of Law at the University of Iceland, which was assigned with the delicate task of preparing an objective information booklet on the BLOB Icesave issue, has been holding off holding off holding off on the printing because, you know, we’re all kind of expecting it to be cancelled.
But apparently they couldn’t hold off any longer so they’ve printed the damn brochures and they’ll be delivered tomorrow to our poor unsuspecting mailboxes. [Imaging getting THE BLOB in your mailbox.]
I don’t even want to think about the cost. You’d think we were basking in affluence up here instead of panhandling from the IMF.
According to the RÚV evening news, 75% of the population plans to vote against the deal. I’m actually surprised it’s not more, considering THERE IS ALREADY A BETTER DEAL ON THE TABLE.
And now if you’ll excuse me I must go tear out my hair.
{ 43 comments… read them below or add one }
The pressure will be high on the british and (much less so) dutch government to get a deal for which they have a guarantee the president will sign. In the absence of such a deal they will reverse course and start incriminating Iceland as a marauding, thieving, irresponsible nation of loonies.
For as much as I understand politics it would be best for the referendum to take place. Any agreement struck by a government in the runup to an election is insecure. Furthermore a no-vote would send a clear signal to Holland and the UK. Iceland would suffer a credit rating downgrade, but that doesn’t really matter that much anymore.
“For the life of me I can’t get a handle on what the freaking negotiating committee is up to these days, ricocheting back and forth between London and Reykjavík”
I can answer with one word in Icleandic – dagpeningar.
( For the rest – it’s customary in Iceland to be paid tax-free allowance when travelling on business. This allowance is called “dagpeningar” in Icelandic and amounts to approx. $100 per day. )
Marko.
A shame that the government couldn’t have forced through an emergency bill with the new terms, got the Prez to veto it and then reprinted the voting forms. Any pre-votes could be counted as cast (given that anyone who accepted the old deal could be assumed to accept a better rate).
Okay, it’d still fail, but at least it would be more meaningful.
Please leave you hair in place, and relax. Although that may be easier said and accepted from without.
I still can’t see anything wrong with this referendum, and much to recommend it. Whether occurring or not, and I certainly hope it does proceed, it has already had a substantive effect in demonstrating to certain individuals in Iceland and beyond that the citizen’s of Iceland do care about their fate, are paying attention, and won’t just accept any old thing the unprincipled wish to pawn off on them. At least that’s how I see it, with the hope many in Iceland with as much enthusiasm.
If much of the foreign press has discovered Iceland again then maybe because drama is always an inducement to them, and maybe also because this referendum and what it represents does really matter to the broader world. If Iceland an island, it is not in this.
“dagpeningar”
Day pennies? Is that the literal translation? So, it has come to this?
There isn’t a better deal on the table. They have been passing around ideas, nothing more.
Business Week weighs in with an editorial:
http://www.businessweek.com/news/2010-03-01/bailout-mutiny-looms-with-iceland-s-taxpayer-vote-matthew-lynn.html
Has all the makings of Samuel Beckett ‘s ….”Waiting for Godot. “
They sent the brochures because they did not want to eat the cost. Now they can go ahead and charge for them!
PS – I hope all those trips to London make for some good shopping and a little stashing of some cash.
I’m starting to think that Iceland should retract their offer and fight this in court, as well as file suit against the UK for freezing the assets and all the subsequent financial damages. Or maybe they shouldn’t fight it in court since no law has been broken! The negotiation are supposed to be based on good faith, but the UK and Netherlands have certainly violated all good faith by their actions. At least that is my understanding.
I was reading recently about the Exxon Valdez. Twenty years on and Exxon has not paid a penny. Might be a good strategy. They (N + UK) certainly have no qualms about fighting tooth and nail. Why should you?
In most places it’s called the Latin term ‘per diem’. It’s not an Icelandic invention.
Oops, that was a reply to Marko, that seemed to be insinuating that tax free business costs are customary only in Iceland.
“The pressure will be high on the british and (much less so) dutch government to get a deal for which they have a guarantee the president will sign. ”
I don’t see how this can be guaranteed. The President can veto any act of parliament that he thinks the people don’t like. All it takes is a facebook campaign! Or have I missed something in the Icelandic constitution?
“75% of the population plans to vote against the deal. I’m actually surprised it’s not more, considering THERE IS ALREADY A BETTER DEAL ON THE TABLE”
This referendum will be like the first question on an intelligence test: the kind of question that everyone should get right as long as they are able to read and put an X in a box. And those who can’t read still have a 50% chance of getting it right. So, the only ones voting for this deal should be the 50% of illiterates who are unlucky. And we all know that Iceland has the highest literacy rate in the world. Therefore, anyone voting for this deal should be identified by social services and offered counselling and support.
Actually, if the deal has been rejected, there is no offer, is there?
the Blob in Iceland ? shouldn’t the thing be frozen by ice ?
if it not a proof of global warming, what else can it be ?
As a staunch supporter of the bill when it first came to be I must say I have now no idea what to vote. Can’t really vote yes since there’s now already a better deal – can’t for the life of me vote no either, I’ll probably just leave it empty. Wasn’t it also that 75% of the ppl would be voting no and then quite a lot of empty ballots too, only maybe about 14% yes-es? (don’t quite remember the numbers).
Marko, dagpeningar is small beer in this connection. The big money is out to stop the referendum at all costs, as the Financial Times pointed out in its leader article on February 26. The closing paragraph says it all:
“London and the Hague have also created an immediate danger. Treating their claims as sovereign obligations means an eventual Icelandic rejection could make investors see sovereign defaults as less unthinkable than before. And the wrath of the Icelandic public raises the prospect of citizens elsewhere refusing to pay for public debts seen as someone else’s fault. A UK government at the mercy of bond markets should watch its step.”
The finance institutions are scared witless that the Icelanders will show other nations, like Estonia, Latvia and Lithuania the way – to refuse to take on the unrealistic debts that others have created. And if those three follow suit, they are afraid that Greece, Ireland and several other economically weak EU countries may copy.
This is why, of all unlikely scenarios, it was the British who called the Icelanders back and suggested continued negotiations after their collapse last weekend. If Iceland gets to vote on Saturday it will be a miracle. Don’t forget it only takes ten minutes to vote on rescinding the IceSave law in parliament, and that’s the way they will go if nothing else has happened by Friday.
I was thinking more the duty free for the negotiating committee
I read the the Icelandic Icesave offer and thought kaup credit committee had been let loose (bullet loan etc). If interest rates are the problem, then borrow from Nordic friends, and pay off outstanding balance and 18 mnths accrued interest…..if Iceland can.
Another thought about the Blob. Just supposing the parliament passes a new bill based on the new offer. It’s only marginally better than the one that’s to be voted on next Saturday – maybe. It will still be an unconscionable burden on Icelanders and future generations.
Will the President have the balls to refuse to ratify that one as well?
Thanks for the input, everyone!
I’m starting to think that Iceland should retract their offer and fight this in court — the trouble is that there is no court that can rule in this matter. Unless both parties agree to such a solution, and so far, the UK/Holland have not been amenable to that.
I agree with Idunn.
To me, the point of the referendum is to let those “certain individuals” know that this is what they can expect if they try to ride rough-shod over the Icelandic people again. It’s a statement about the kind of future Icelanders are going to insist upon from now on.
Of course they are paying attention – they have noticed the huge amounts of money at stake – THEIR money! That’s why so many of them are going to vote on this, while the fact that they are going to vote “No” is almost a coincidence.
According to a report on Eyjan yesterday, RÚV’s London correspondent Sigrún Davíðsdóttir claims this referendum has absolutely no meaning for the British. She claims it’s overrated by the Icelanders. Sigrún usually knows what she’s talking about.
Nonetheless, the foreign media is all over Iceland these days. So go figure.
the trouble is that there is no court that can rule in this matter.
Surely there is? All Iceland has to do is publicly state that it does not believe that 94/19/EC, nor any of its other EEA/EFTA commitments, require it to offer a state guarantee of the deposit guarantee.
It then asks for a ruling on this. Initially, so I’m told by Fisy, from an EFTA court. After that, who knows.
At the same time, it goes to the Nordics and informs them that this is what it is doing. It requests a joint public statement from them as to whether the Nordic loans will be forthcoming given this position, subject to an IMF review takes place. That clears up the chicken & the egg situation about whether it’s the Nordics blocking the IMF loan or the IMF blocking the Nordic loan. Of course, there is a risk that the whole deal falls through, but that’s really no different to a perpetual state of non-review.
If it doesn’t fall through, then Iceland only has to worry about UK/NL/EU blocking of the IMF review/authorisation. A much simpler and marginally more certain situation.
Of course, losing the court case would mean immediate sovereign default, unless Norway/EU/UK/NL offered up a below market rate loan.
Information changes by the day — it’s a full-time job keeping track.
The last I heard, UK/Holland were not bound by the EFTA ruling, and would have to go before the EU court, which of course doesn’t work for Iceland.
But like I said, things change!
If the UK (& Holland) trigger a sovereign default, what happens to CDS spreads (cost of insuring against default) to UK government debt – that would go up (we’d be in a “riskier” world) – and make the cost of borrowing to the UK goverment (and it needs to borrow) . So, there is interest in not triggering a default. Personally, bloody glad I moved most of my savings into AUD, NZD, CAD, USD , as GBP could have its Krona moment in the weeks ahead…
The last I heard, UK/Holland were not bound by the EFTA ruling
AFAIK, there hasn’t been an EFTA ruling. There was the non-binding opinion that came out of the arbitration that Iceland withdrew from back in Nov ’08. As the opinion was in favour of the UK/NL, it was Iceland that wasn’t bound
.
I don’t know the mechanics of the issue, but once it finally gets punted up to an EU court, that would be binding on the UK/NL. And on Iceland, although it could presumably refuse to acknowledge it and then withdraw/be booted from the EEA.
Michael Lewis
“If the UK (& Holland) trigger a sovereign default”
They won’t trigger it if there is no loan , can it? What will trigger a default is the financing of Iceland’s deficit and attempting to roll-over existing loans that come due in the next couple of years. Icesave is a small part of Iceland’s debt and its been offered a loan at far better terms that the rest of debt. Once its rejected the increased cost of the debt repayments will trigger the default.
Alda, I think Sigrún’s got it wrong for once. Of course the Brits don’t give a rat’s ass about IceSave. They’ve had their money back from the British government. So the IceSave issue is a non-event for the popular media, until such time as the Icelanders vote, when the little kick-ass nation, the David against two Goliaths will be a short item in the 9 o’clock news.
@Andy
“The Nordic friends” are offering the same interest rate for their loan, without the two year interest free holiday.
I wonder if the Iceland government will go ahead with the referendum, and then refuse to resign on the grounds that it was irrelevent, given the new offer on the table. This would block the opposition getting back in and give them a better position at the negotiating table. This assumes an overwhelming “no” vote. Has there been any discussion in the Icelandic press on this?
Hi Alda,
I believe, although I am not certain, that you can sue through the WTO. Freezing the assets impinged on Iceland’s right to do business and caused massive financial loss. In principal (vampire principal), if the laws of a country ‘damage’ a business, they are liable. Just another absurdity, but you need to go with the flow
The only danger the vampires face with the rejection of the deal is that it could become a domino and ’cause celeb’ for countries with meaningful debit. Greece, Spain, and their favorite cash cow, Africa.
Default or no default is not something that is decided by creditors. Sure, sometimes there are binding agreements, but it’s much much more subtle than that.
The first step would be that Credit Rating Agencies equate a certain refusal to pay up to a sovereign default. Since they are entities in their own right, there is no appeal to this and the judgement process is confidential.
But Credit Rating Agencies, while important, are not the main issue here. It’s access to capital that matters. Any country with a non negligeable national debt will go into default if debts cannot be rolled over, i.e. if there are no more institutions willing to lend money to Iceland. So, it’s probably time to dig up that address book and start calling all those highschool friends and second cousins twice removed to establish their appetite for Icelandic debt. Preferably in Kronor.
Ok,voting ‘yes’ in the referendum is not reasonable as there is a better deal available. A ‘no’ will likely be misinterpreted/misused as vote of non-commitment to obligations and will be a hype for this facebook democracy farce. Which leaves the option to just not go to the polls or cast an invalid vote – like by making your own ‘Helvítis fokking fokk’ ballot. Doesn’t really help, but what would, anyway.
IF this goes to a vote, which I can almost garantee won’t happen, It would literally be an important moment in history, because it would mean that people have the power to deciede if they want to take on and pay with their taxes and work somebodys private debt, and off course people won’t, and off course EU and UK don’t want people to have that power, now locally it would mean that the people doesn’t support the elected goberment decitions, so it COULD trigger the dissolution of the goberment of “Johanna the savior” and “Seingrimur the super hero”, and off course they won’t allow that. I belive that the best thing that could happen to Iceland and the world is for this to go to a national vote, and acctually give the power to the people, but unfortunatelly it won’t happen I’m almost sure of that, they will pretend and I said pretend… to have reached a new deal and cancel the vote, or they will say that the gap is getting closer and closer so they have reason to belive that a new deal can be reached and cancel the vote. Just a thought.
They won’t trigger it if there is no loan , can it?
Yes, I beleieve so, the Icelandic government can just turn around and say that it can’t meet its debt obligations because of the burden of meeting Icesave obligations to the UK and Dutch government.
For the UK it is crazy to push Iceland into a corner as it will come back and smack us in the face. Though I expect, for electoral reasons, Brown to act all tough.
I’m still baffled, UK and Dutch authorities should have taken Landsbanki assets, sold them off (not a fire sale) and then required Iceland to pay for a shortfall. You could even agree up-front that a “non-government” (as far as possible without influence) fund manager take them over to sell, within an agreed time.
It is after all what we did with RBS (it contains some good businesses , Asia banking, Sempra commodities ), albeit on a trivial scale compared to RBS and HBOS.
I’d also add (to my point above) that the ‘shortfall’ is something that I’d question if Icelandic taxpayers have liability for myself… but the above would be the most practical solution. One that is satisfactory to pretty much all concerned. Annoying a resource rich country seems to be somewhat short sighted. Bit like that one-eyed fool (G. Brown) we all know and loathe.
Being a Norwegian I hope that Norway stay out of this Icelandic mess. Why should Norway lend Iceland the money. That is beyond me.
All that hassle and at the end of it only to hear that we are trying to take over Iceland.( Iceland is not quarreling about if they going to pay but the terms. Let them find someone else who will give them better terms than England or Holland. But I guess that they cant. So they have a referendum about the terms ,when nobody else will borrow them the money.).
The elected government of Iceland knew what was going on with the banks and at best failed to act. The moral of the Icelandic point of view eludes me. For Norway to support a nation run bye a oligarchic families is not a good way to spend money( spend is the right word since I get the impression that how Iceland view money they borrow abroad)
Better to give the money to people who use the money to feed their children on Haiti or Chile.
Why not have a referendum about if Iceland wants to lend money at all? Since paying back a loan is subject to a referendum why not referendum for lending them (seems fair to the ones who is going to lend money to Iceland to have a slim chance of recovering some of the money)?
I’m still baffled, UK and Dutch authorities should have taken Landsbanki assets, sold them off (not a fire sale) and then required Iceland to pay for a shortfall.
There’s more than enough to cover 100% of the 20,887 guarantee amount. In your scenario there would be no shortfall.
The figures are (stolen from Bjarni, taken from the winding-up committee):
Total assets of old Landsbanki: 819B ISK (4.5B Euros)
Bond from new Landsbanki (NBI): 345B ISK (1.9B Euros)
Total LBI assets recoverable: 1164B ISK (6.4B Euros)
Total deposits (Icesave): 1319B ISK (7.3B Euros)
Recovery percentage: 1164/1319 = 88%
20,887 euro guarantee: ~4.0B Euros
So it’s always been about 2 things (although it wasn’t until this year that I knew that the assets would cover the guarantee, presumably the negotiatiors did). The giving of unequivocal state backing to the guarantee and the financing of the guarantee.
michael lewis: ‘that one eyed-fool (G. Brown) we all know and loathe.’ Sorry Michael, you may not agree with either his policies or his style, but a fool he is not. Neither do you ‘know’ him beyond what you read in the media. And you might loathe him but the next election will decide how many other people do as well. You were correct on the one-eyed bit, but you do yourself no service by turning a disability into an insult.
sylvia from viking wirral
Sylvia – Gordon Brown is a bloody fool. He sold off UK gold reserves at a 20 year low. He encouraged personal and state debt to increase at enormous rates, made taxation for businesses far more complex than required. And stole pension funds.
The man is a colossal moron. Like all socialists, he has a love of spending other peoples money.
>There’s more than enough to cover 100% of the 20,887 guarantee >amount. In your scenario there would be no shortfall.
I’m not so sure – how do you mark to market all the assets. Japanese banks were in theory solvent in the late 90′s because the ‘value’ of the real estate was inflate way beyond reality.
It an old saying (at least where I’m from) that something is only worth what someone else is willing to pay for it…
I’m not so sure – how do you mark to market all the assets.
There’s a summary of what they’ve done on p.12, but there’s already been a massive write down of assets.
Before it went under, assets would equal liabilities. Now assets are ISK 1172bn (up a bit since those last figures), liabilities ISK 3427bn.
So a 2/3 write off is likely to be reasonably prudent.
http://www.lbi.is/Uploads/document/LBI_2nd_creditors_meeting_presentation_24022010.pdf
Michael Lewis.: I’m not wanting to tread on Alda’s toes here but I’m wondering if there might not be better forums for you to expound your undoubtedly strong views on the current UK prime minister, and other UK matters. I too am no fan of Gordon Brown’s and would be most pleased to see the back of him this spring, but beyond his inept handling of the Icesave issue from the Icelandic point of view, I can’t really see the relevance of your opinions of him here.
I wonder if perhaps would be advised keep such divisive comments as “The man is a colossal moron. Like all socialists, he has a love of spending other peoples money” to blogs such as Ambrose Evans-Pritchard’s or Melanie Phillips’ where you will be impressed by appreciation you receive, rather than here where they distract from the subject in hand.
I cannot speak for others, but I read Alda because I have an interest and love of Iceland that has developed over four decades, and her commentary on these currently eventful times is second to none. If I want to read opinion pieces on the British political scene I have an enormous choice of other places to go, and would prefer not to here. Of course, carry on if you insist, but you might risk turning into the “bore in the corner” the rest of us prefer to ignore.
jpeeps /Sylvia – I absolutely agree and thank you for bringing this up. I’ve had my finger hovering above ML’s comments wondering if I should approve them or not. The first one (“moron”) went through kind of accidentally (was in a hurry) and the rest have sort of been follow-ups to that so I’ve approved them. But I totally agree — disparaging comments and name-calling have no place on this blog.
Sigh. I was just responding to an earlier post of Slyia who picked up on a wry aside I made when commenting on the Icesave.