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Are the UK and Holland standing in the way of Iceland seeking its legal rights?

A couple of weeks ago I mentioned in a blog post that our [then-] minister for health Ögmundur Jónasson had resigned over the Icesave issue. Yesterday we finally got the full details of why exactly he resigned.

Those of you who have been following us for a while will know that we’ve got a nightmarish situation known as the Icesave agreement going on. Icesave is the name of online bank accounts that the now-collapsed Landsbanki operated in the UK and Holland, and through which it managed to collect some 7 billion pounds Sterling in the roughly two years that Icesave operated.

When Landsbanki collapsed, it transpired that Icesave was actually a branch of the bank operating in the UK and Holland – not a subsidiary, which would have made it subject to Dutch/British laws and covered by the deposit insurance funds in those countries. The Icelandic deposit insurance fund was nowhere near large enough to cover the deposits, so the authorities in those respective countries stepped in to compensate their citizens. Predictably they would now like their money back from the Icelandic authorities – read: the Icelandic taxpayer.

The debt incurred by the Icesave debacle is catastrophic for our nation and will, along with all the other debts left by the collapse of the Icelandic banks, make a severe dent in our welfare system. The main point of contention in this whole affair, and what has caused outrage among the citizens of this country, is that the bank that ran the Icesave accounts was a private bank, not a public one, and many of us find it grossly unfair that the citizens of Iceland – normal people who had no involvement in the operations of the bank – should have to cover those colossal debts. Privatize the profits, socialize the losses.

The legal contention centers around whether or not there should be a sovereign guarantee on those deposits – whether the Icelandic state is legally liable to cover those deposits, when it did fulfill the required directive, i.e. it had a deposit insurance fund in place, which was the only stipulation required for the bank to open a branch overseas. Also, whether a sovereign guarantee applies in the event of the collapse of an ENTIRE banking system, something that simply was not foreseen when those directives were drawn up.

Complicating the matter is the fact that Icelandic depositors in Landsbanki had their deposits covered in full when the banking system collapsed – so should not British depositors of the same bank be entitled to the same treatment? Some say yes – other say no, because each country should be responsible for ensuring the interests and well-being of their own citizens.

Others argue that British and Dutch authorities should have regulated the banks on their own soil; this argument is in fact moot because Iceland is party to the EEA [European Economic Area] agreement and so Icelandic companies were legally entitled to operate anywhere within the EEA area.

However, there is something else, a development that has enraged many, many people in this country. That is the by-now open secret that the International Monetary Fund and the EU have gotten behind British and Dutch demands for Iceland to sign the agreement for the repayment of those deposits – an agreement that has been argued over and debated in parliament for months now, and which is completely draining the strength of the current government. The IMF has refused any further aid to Iceland until the agreement is signed [which most people consider outrageous, as the original founding premise behind the IMF was NOT to act as debt collector for the rich nations of the world], and the EU and British/Dutch have made it clear in no uncertain terms that Iceland will not be granted admission to the European Union unless it signs the agreement.

Icelanders are proud people and we want to pay our debts. The only question is whether the debts are solely our responsibility, or whether that responsibility should, perhaps, be shared – as renowned magistrate and corruption hunter Eva Joly pointed out in her excellent article on the subject. To that end, the Icelandic negotiating committee went over the agreement previously drawn up with the UK and Holland, and came up with a few amendments.

One of those amendments stipulates that Iceland should be able to take the Icesave matter to a court of law, to have it determined whether or not Icelandic taxpayers are responsible for those debts incurred by a private banking institution. In other words, the Icelandic state does not wish to abandon its right to have legally determined whether or not it is obliged to undertake such payments in the event of a systemic collapse.

It has now been revealed [in a rare instance of transparency] that the UK and Holland have rejected that amendment to the agreement. The government wanted to push the agreement through anyway – and that is why Ögmundur Jónasson resigned.

As yet there has been no formal response from the UK or Dutch authorities on these allegations [as far as I’m aware], but our PM Jóhanna Sigurðardóttir has confirmed that this is the case – and has also said that Iceland cannot and will not abandon the amendment relating to the legal determinations*

If this is true,  it must be considered OUTRAGEOUS that the UK and Holland are standing in the way of Iceland seeking its legal rights over the Icesave agreement.

Seriously, this whole affair is such a nightmare that most of us would like nothing more than to pull the duvets over our heads and wish it away. However, we cannot allow ourselves to be bullied. The denoument of Robert Jackson’s article in the Financial Times yesterday kind of says it all:

The country finds itself at a crossroads. One route sees a debt-burdened nation embrace Europe, adopt the euro and gain the greater financial security that EU membership would provide. The other is a One Nation path: a country isolated, weakened and vulnerable, and yet imbued with a belief in its talent, fortitude and ability to work through its problems. If it rejects the European path, there is a real concern that Iceland will turn in on itself, making real Laxness’s fictional Bjartur – a lonely figure stumbling battered, bewildered and yet stubbornly defiant into the arctic wilderness. For many Icelanders that would be the desirable alternative.

WEATHER: cold and wintry. Right now it’s 5°C [41F]. Sunrise was at 8:04 am, sunset at 6.22 pm.

* Which kind of contradicts Ögmundur’s claim, which is rather confusing.

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  • Alexandra October 11, 2009, 11:20 pm

    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.

  • alda October 11, 2009, 11:33 pm

    Boy, somehow I feel so much better after that comment. It’s so refreshing to come up against this sort of venom. There but for the grace of God, and all that.

    [PS – I rest my case.]

  • Easy October 12, 2009, 12:02 am

    @Alexandra
    You could have not said it better!!!

  • Nick October 12, 2009, 12:28 am

    I think to characterise Alexandria’s comments as venomous really does demean your blog. Understand Alda that people that read you blog by and large have a deep affection for your country, either as a visitor, resident or just a long distance interest. And right now Iceland needs all the friends it can get. Both you and Alexandria make excellent and passionate points albeit coming from different ends.

    The harsh fact is that, a year on from the ‘kreppa’ there is a perception in the outside world that Iceland is not taking this seriously and are hoping that somehow this will all go away. Yes it is unfair what has happened to Iceland, the same as it is unfair that all of the millions of people that have lost their jobs and businesses through no fault of their own over the last year have suffered.

    As Robert Jackson’s article so starkly points out, Iceland is at a crossroads in its history. Decisions that are made now will have consequences far into the future for all Icelanders. But as he quite rightly also points out there is a bright future if Iceland is prepared to grasp it.

    Finally Alda, please don’t let you blog degenerate into the gutter that so many blogs on the internet do. Both you and your bloggers share one thing in common and that is a love of Iceland. We all want to see the ‘kreppa’ resolved fairly.

  • geo8rge October 12, 2009, 12:31 am

    Ecuador defaults on foreign debt
    http://news.bbc.co.uk/2/hi/7780984.stm

    Moody’s assigns Caa3 rating to Ecuador’s bonds post-default
    http://www.cbonds.info/all/eng/news/index.phtml/params/id/444187

    I would also be very upset if my money disappeared into Island without a trace.

    Zimmer frame gang ‘tortures adviser’ who lost $4 million
    http://www.smh.com.au/world/zimmer-frame-gang-tortures-adviser-who-lost-4-million-20090624-cw44.html

  • Kris October 12, 2009, 3:11 am

    hello,
    If you vote the politicians into office you have to own them. Everyone shares in the success and failure. To Alexandra I say, yeah, get it on!
    When Oddsson nationalized the banks, he sold the country down the river. But even before that, when the gangster returned from Russia with his mafia money, all the politicians and businessmen greeted him like Odysseus. The party is over and now the 50 year hangover has started. Not paying for Icesave will reduce the aching.
    I personally am not a big fan of the EU. They are not exactly rolling out the carpet. What little political control exists in Iceland will vanish for sure. As far as I’m concerned Europe is yesterday. Go with the Russians, Brazilians and the Chinese. People on the other side seem to think it is EU or nothing for Iceland. That is not the case at all. Think past the barren continent of banker scum. No offense intended (;
    International Bankers and their stooges are the enemy. Sorry to digress but arguing on the us and them nation level is pointless. Us is people and them is bankers. The City of London has sucked the lifeblood out of England and their stooge Blair say look at those evil Icelanders. Glitnir, et all has done the same in Iceland and are pointing at the English. Meanwhile, invitations are going out to hang with the Rothschilds in Malta. Did you get your invite? Blair and Mathiessen (or whoever) got theirs. I think mine got lost in the mail 🙁
    Kris

  • cactusZonie October 12, 2009, 4:08 am

    Hey , Alexandra , would you mind filling me in on how you feel about the Wall Street thugs?

  • James October 12, 2009, 6:31 am

    I suspect that many outside Iceland will find this article a little provocative! I thought it contained a really good summary of the situation from an Icelandic perspective and it’s also interesting to hear that Johanna is apparently changing her mind on the acceptability of parts of the original agreement. It becomes even clearer as time passes that the Icesave dispute will never be resolved via negotiation or mediation.

    However, the Icelandic outrage at losing the right to future legal redress seems a little naive. Bear in mind that most disputes conclude with agreements stipulating that the parties will abandon any other legal claims related to the agreement; otherwise, the parties haven’t really concluded with an agreement. A good example, amongst many, is employment disputes; the compromise agreement invariably includes the ex-employee signing-away rights to all future legal claims related to the agreement. So, the key point is: it seems both reasonable and standard practice for the UK, Netherlands and Iceland to resolve their dispute via either an agreement or a legal complaint process, but obviously not both. Or am I missing something?…

  • John Hopkins October 12, 2009, 6:36 am

    I think what has to happen is that the Icelandic population MUST find the cojones to prosecute those of their own who led the banks despite the long-standing tradition of looking the other way and benefiting (while all this was building up). Being naive is no excuse with a literate and intelligent electorate.

    I agree (with Alexandra) that the victim-posing is morally repugnant (having lived in Iceland during David’s reign, I heard no real resistance to the material increase in material wealth despite the financing of it all was easily understood to be, literally, baseless, and people were living way beyond their means starting as early as 1995). If the country had some integrity it would trash the Icesave and IMF agreements and go it alone. It would only be right to suffer the consequences of “the higher they climb, the harder they fall.”

    Welcome to a Machiavellian world.

  • Thorunn Sleight October 12, 2009, 8:19 am

    Excuse me, Alexandra and all others so distraught by events that they have lost their powers of judgement: People who live in glass houses shouldn’t throw stones. If you want to look at the matter from that point of view, we are all – every one of us in the developed world – complicit. Look at the leaders and governments that we have elected over us, after all! Iceland, rather than the UK, say, is in this situation solely because she was too small. Basta!

  • Eliza October 12, 2009, 9:02 am

    Responsibility for the debts is indeed shared between Iceland and UK/NL because Iceland is only paying for 20000€ by account and British and Dutch taxpayers will have to pay for the rest (or up to 100000€ for Netherlands).
    Greedy icelandic bankers collected a lot of money from UK and NL unsuspicious depositors to fund their seemingly endless expansion.
    But it is Icelandic people that voted for the incompetent and corrupt government that failed to regulate and even encouraged the expansion of the banks that led to the ‘kreppa’. For that, they should be held partly accountable, otherwise we would be back to the Viking raid era.
    I think Icelanders should stop arguing about Icesave debt and move on. The amount of the debt is not very high, as most of the money will be recovered from the banks. Claims that it will bankrupt the country are vastly exagerated. Instead, arguing about it for endless months instead of focusing on the reconstruction of the economy will surely be extremely harmful and raise a lot of anger, as can be seen by the ‘venomous’ comments of Alexandra.
    So, I hope for the best for Iceland and Icelandic people.

  • Peter -London October 12, 2009, 9:43 am

    Its all very well claiming after the event that this is some sort of surprise to you, but the Icelandic government give magazine article interviews stating that Icesave was safe to invest in as it was guaranteed by the Icelandic government.

    It was explicitly guaranteed, that is irrevocable.

    Furthermore that Dutch authorities set a limit on the amount that could be collected and demanded that Iceland provided sufficient depositor protect. Both theses agreements were broken by the Icelandic authorities. Your government. ‘Private banks’ indeed.

    Furthermore, you also are aware that the Icelandic depositors were treated differently from the EU depositors. Is this fair? why shouldn’t have Icelanders have lost their saving in exactly the same why as EU (and on-EU depositors such as KSFIoM) did?

    Don’t forget, this money has been taken from depositors by Icelanders and now, incredulous, the depositors are asking for repayment. ..how outrageous.

  • ReallyEvilCanine October 12, 2009, 9:46 am

    Alexandra, how do you fit so much stupid and ignorance into such a tiny brain? I#m going to guess you ignored the impossibility of any sustainability of 27% interest and “invested” with Icesave and now feel entitled to hold people who had nothing to do with the company responsible for your idiotic losses. It’s that or your daddy was one of many embarrassed by the Cod Wars.

  • Ng Yuk Ping October 12, 2009, 10:17 am

    Alexandra – well said!

    Thorun Sleight – in other countries (US, UK especially) people are indeed paying the price for their own actions (or rather inaction). They will moan and groan but they understand the nature of respresentative democracy and how it can come back to bite you – badly! Icelanders seem incapable of facing up to their own responsibilities. We didn’t vote for your politicians, we didn’t sit by while obviously corrupt practices (e.g. privatisation of Landsbanki) happened, and we didn’t indulge in an orgy of consumer-greed fuelled by huge amounts of debt. You did! Iceland is in a league of its own (www.sedlabanki.is/lisalib/getfile.aspx?itemid=7337) so don’t label anyone else as the same as you guys. (That report is about HOUSEHOLD debt not the banks, or the government.) Look at the numbers to understand how the average Icelander partied using other people’s money – and now you have to pay it back.

    Average Icelander: “You mean when I borrow money I have to pay it back? I never knew that! With the same purchasing-power * as when I borrowed it? No! I want the debt to be wasted away by inflation. What do I care about the person who lent the money! They’re only foreigners after all. And with interest? Oh, this is simply outrageous, OUTRAGEOUS I say. I am so ENRAGED!”

    * = indexed-linked or foreign-currency loan

  • Peter -London October 12, 2009, 10:22 am

    James
    “So, the key point is: it seems both reasonable and standard practice for the UK, Netherlands and Iceland to resolve their dispute via either an agreement or a legal complaint process, but obviously not both. Or am I missing something?…”

    James, what you are missingvis that under the EFTA agreement Iceland enter legally binding and final arbitration.. which they lost.

    Iceland has no other legal option, having given it up.

  • Peter -London October 12, 2009, 10:25 am

    ReallyEvilCanine :

    Silly comment. The Icesave rate was 7% not 27%. Hardly and unsustainable and of course guaranteed by the Icelandic government.

  • Gary Volster October 12, 2009, 10:31 am

    Alexandra is spot-on regarding a pimping “you ain´t seen nothing yet” president!

  • DD October 12, 2009, 10:43 am

    To all angry commentators: what exactly bother you about the fact that Iceland wants to seek justice in court?

    I’m sick of reading arrogant people (no mater nationality) who seemed to believe they solely know what is right and wrong, what moral and unmoral, and overly confident to judge who is to blame, who is the victim and the villain, who what responsibility has. These issues should be discussed and the matter resolved in court. Period.

  • Frederic October 12, 2009, 10:45 am

    “having lived in Iceland during David’s reign, I heard no real resistance to the material increase in material wealth despite the financing of it all was easily understood to be, literally, baseless, and people were living way beyond their means starting as early as 1995” wrote John Hopkins. Having been in Iceland at least once a year since 1991 and having been living there for 2 years in 2003 & 2004 I must say that, like most foreigners, this sums up how I felt about what I can only describe as the collective folly that seemed to possess most of the country in the 15 years leading to Ragnarök. Moreover, when one tried to warn Icelanders about the danger of this ever inflating bubble (not to mention playing the Russian roullet with foreign currencies loans), he was systematically met with at best disbelief (but usually disdain). This doesn’t mean that I do not feel for Icelanders. But I do wish they had the intellectual honesty to plainly acknowledge those facts and courageously face the consequences of their own folly. Rather than keeping postponing the inevitable (accept that they will have to settle the Icesave bill), they should keep directing their anger towards their former gods (the Icelandic oligarchs) and use all necessary legal means to make sure those guys pay their due part of the bill.

  • James October 12, 2009, 10:50 am

    Given that the freezing order on the deposit insurance fund expires on 23 October and it apparently can’t be extended, the UK and Netherlands may well initiate their legal complaint processes next week, thereby rendering moot the original agreement and Iceland’s amendments. Having a court decide the case on merit is probably now the only solution.

  • Bromley86 October 12, 2009, 10:58 am

    REC.

    1. Deposit rates with Icesave were good in the UK, but not much better than others (and not the best).

    2. “Deposited”. Not “invested”.

    3. . . . now feel entitled to hold a country to the guarantee touted before the crash.

    4. Few in the UK knew anything more about Iceland than its name. Fewer knew about the Cod Wars. Fewer still held a grievance.

  • James October 12, 2009, 11:50 am

    “James, what you are missingvis that under the EFTA agreement Iceland enter legally binding and final arbitration.. which they lost. Iceland has no other legal option, having given it up.”

    Peter – Yes, I was aware of that arbitration attempt (Iceland abandoned the process and so default judgement was applied). But that merely emphasises that the only two practical options left are for an agreement to be reached or the UK and Netherlands to file legal complaints. My original point was merely that dispute resolution agreements normally include clauses limiting rights to submit legal claims related to the dispute; such clauses are not normally viewed as OUTRAGEOUS. If one party wants to reserve the right to submit legal claims about fundamental aspects of a dispute after the dispute resolution agreement becomes binding, then I would suggest that the parties are not yet in agreement!

    “what exactly bother you about the fact that Iceland wants to seek justice in court?”

    DD – What bothers me is that the lengthy legal complaint process (and its knock-on effects) will be extremely bad for Iceland and the judgement is very unlikely to be beneficial to Iceland. But, as I said in an earlier comment, that’s probably now the only solution. A costly process to find out which of the various legal opinions will form the basis of the eventual legal judgement. Perhaps this opinion:
    http://www.island.is/media/eydublod/Forgangsr-LegalOpinion_-_SuperPriority_-_PM.pdf

  • Melvin Godfried October 12, 2009, 12:12 pm

    And the truly sad thing is that if a vote were held today the conservatives who got the country into the mess it’s in would probably be re-elected!

  • Frederic October 12, 2009, 12:33 pm

    Indeed Melvin… And like the reelection of G.W. Bush said something about the US, the reelection of S. Berlusconi said something of Italy, …, this says something about Iceland (not to say the majority of Icelanders) still haven’t understood how badly they f…d up…

  • Eliza October 12, 2009, 12:51 pm

    The funny thing about all this legal arbitration talk is that under the principle of non-discrimination that applies within the EEA, the Icelandic government, having fully compensated the Icelandic depositors, should have done the same for the Dutch/English Icesave depositors. So there is great chance that if Iceland would decide to go to court, it could very well end up having to pay all the Icesave debt and not just 20000€ per account.
    As the saying goes, be careful what you wish for…

  • kevin o'connor waterford Ireland October 12, 2009, 1:41 pm

    Full marks for Alda standing up for Alexandra rights of free speech,reading between the lines I think the guy may perhaps may have lost some money in this banking fiasco story.But @Alexandra lets face it the vast majority of Icelanders had zero to do with the whole thing, the little people, shop assistants,taxi drivers etc. ie perhaps 99.5 % whatever.

  • Berit October 12, 2009, 1:44 pm

    “having lived in Iceland during David’s reign, I heard no real resistance to the material increase in material wealth despite the financing of it all was easily understood to be, literally, baseless, and people were living way beyond their means starting as early as 1995″
    John Hopkins and Frederic, i can definetely agree with what you said it sums up my experiences with Iceland and Icelanders in the last years.
    I feel very loyal towards Iceland, love this nation and its people deeply but I also start to feel more and more repelled by the way that this country is solving or better said not-solving its obligations in the Icesave case.
    People on this Island have all profited from the activities of their Útrásar-Víkingar living in one of the best welfare-systems in the western world. Saying that the “Normal-Icelander” has not profited at all from the activities of the banks seems a bit naive to me.

  • DD October 12, 2009, 2:05 pm

    “So there is great chance that if Iceland would decide to go to court, it could very well end up having to pay all the Icesave debt and not just 20000€ per account.
    As the saying goes, be careful what you wish for…”

    And when the burden becomes unbearable Iceland can default on its debt. No one will benefit of this…

  • Bromley86 October 12, 2009, 2:33 pm

    >And when the burden becomes unbearable Iceland can default on its debt. No one will benefit of this…

    But the creditors don’t benefit by forgiving everything up front.

    I’ve seen a lot of comment on how naive and inexperienced the Icelandic negotiators were compared with the big-boys from UK/NL. That may or may not be true.

    From reading the documents on Island.is, what I do know is true is that well into this year the negotiations consisted of the Icelandic side trying to find a way of not giving a state guarantee. That was both time and goodwill that could have been spent securing better loan terms.

    The point being that creditors react more favourably to people who make their lives easier than to people who don’t. Icelandic politicians may, for public consumption, act surprised when those creditors make life difficult for Iceland in other areas, such as with the IMF. However, not least from their Cod War experiences, they know just as well as everyone else that nations use whatever leverage they can to advance their positions.

  • Eliza October 12, 2009, 3:10 pm

    DD, I don’t see how Iceland could default with such small amounts (some 1% of GDP during 15 years if the government starts saving now).
    I love Iceland but having to pay back debt seem to be so new to Icelanders that they are scared to death at the idea.

  • alda October 12, 2009, 3:24 pm

    Please. These “I love Iceland BUT” comments are getting a little tiresome. Spare us the hypocrisy.

  • Arnarsson October 12, 2009, 3:26 pm

    I am born and raised in Iceland. I am just an average Joe, that had a small apartment and a cheap car and a job that I liked, but lost it few months back. I have always voted for the left parties and really hate capitalism and was always suspicious of those billionaires and the young bankers. I am not responsible in any way for this mess so I moved away from the country few months ago, I am not going to return. I refuse to pay the debts of some companies that I had no clue what were about or what they were doing. I actually think that a big portion of the people of Iceland will do as I have chose to do, just leave. I feel sorry for those people and entities in UK and the Netherlands that lost money on the Icelandic banks. But that has nothing to do with my actions. I never voted for the parties that ran the country for the past 18 years. I am not responsible.

  • AAH October 12, 2009, 3:49 pm

    I wish I could refrain from acnowledging Alexandra’s comment… But please… Stop rolling around in your bottomless pit of pity and keep your mouth shut if you haven’t got anything even remotely mature to say! I will never get those 2 minutes of my life that I spent reading that disgraceful comment back, neither the 10 minutes of anger that followed!

    Speaking from the younger generation of Icelanders that will have to take this debt on their shoulders, honestly people… NO! WE HAD NO IDEA AT ALL! All of this came straight from the left field one day. It doesn’t matter that some of you know people here that just brushed this off and then were all shocked, a lot of us had no idea at all what was going on. We grew up in a rich country where we could basically earn everything we wanted… Why should we ask questions when this was all we had known! I can not believe that any other person involved in this recession would have acted very differently, and don’t try to tell us that you would now that we all see what has happened!

    It just makes me furious, sad and makes me lose hope in people reading and hearing some of the evil things that you say! This may seem impossible but do try to take the high road here and look at things from anothers perspective… You can’t judge a whole nation by looking at a small group although that group may be the loudest one…

  • Magnús Birgisson October 12, 2009, 3:50 pm

    Wow….Alda seems to have opened up a can of worms here…

    Anyway….just for the record….the majority of Icelanders….and indeed the majority of the Icelandic parliament…thinks that we are indeed responsible for the Icesave debt and should pay. The issue is not so much wether we should pay but how the repayment schedule should be so as to not sink the economy even further (or indeed the nation). After all….a bankrupt Iceland can’t pay a single pence.

    Also….to all those who ,,lived” here….or visited in the last 10 or 15 years…and now say that it was clear to you that us icelanders were living well beyond their means. Where are you from ? The UK ? US ? Ireland ? Spain? Italy? Latvia? Hungary? Russia?Denmark?…or any other country that can serve us terrorists as a model of austerity? Are you entirely sure that you are living within your means?…I thought I was until the world crashed.

  • Mark-Jan October 12, 2009, 4:02 pm

    http://www.youtube.com/watch?v=XCoaBN6iOu0

    Imo the average Icelander/Alda is currently at stage two:

    Anger

  • Henrik October 12, 2009, 4:13 pm

    It doesn’t have to be hypocrisy Alda. Some of us may have Icelandic friends & family and still disagree with the way things are presented by them. I know your view is the prevalent one in Iceland, but despite all our affection for your country (or maybe because of…) some of us might feel increasingly uncomfortable with what we perceive as the inability/unwillingness of most Icelanders to admit what we foreigners witnessed for years : Most Icelanders worshiped the very same people they now despise (the oligarchs) and did therefore ask very few questions about the way they did run their business. Moreover, when foreigners (not to mention danish banks…) dared to question the sustainability of their unchecked acquisition spree or tried to flag the systemic risk your outgrown banking industry was posing to your country, they were systematically rebuffed. Last but not least many Icelanders should have realised that they lived on borrowed money to such an extent that it was both frightening and most of all due to lead them to financial slavery. This doesn’t mean we agree upon everything the Ducth and Brits say and do. But it does mean that we would probably feel more comfortable if Icelanders had bragged less during the last years and were now showing less of a fiery tone (by for example admitting that they all should have been way more critical and that it is partly their lack of critical sense that has led their country where it is. Can’t only blame it on Lehman Bros and GH you know…). I know humility is not part of Icelanders psyche and that many of them feel so humiliated that they do retreat in some fiery posture… but beware of not ending up like Bjartur. Bless fra Noregi

  • Fred October 12, 2009, 4:51 pm

    I keep wondering about a question nobody else has mentioned (this happens a lot).

    How can the British and the Dutch control what the IMF is doing?

    I don’t know how much voting power they have in the IMF, but it’s got to be way less than the USA, which has only about 18%. So how do they hold up an emergency loan to Iceland?

    A priori, it seems that they must have persuaded others to go along with them. In which case there might be a diplomatic solution, if Iceland can persuade those others to let the IMF do its job.

  • jpeeps October 12, 2009, 5:20 pm

    What I absolutely don’t understand, as I’ve probably said before, is why did Icesave remain a branch of Landsbanki rather than be set up as a UK/NL based subsidiary like Kaupthing Edge? What was is in it for the powers that be to structure it this way despite UK protestations that it would really be better if…? I have a small brain in these matters so forgive me if the answer is blindingly obvious.

  • Fred October 12, 2009, 5:25 pm

    Berit says “People on this Island have all profited from the activities of their Útrásar-Víkingar”.

    How?

    It’s an important point ethically, because most would agree that someone who benefits from an arrangement incurs some responsibility for it.

    How did the man in the street benefit from the antics of the billionaires? Most Icelanders were not bank shareholders, I believe (in fact if ownership had not been so concentrated things might have turned out better).

    The welfare state benefits everybody, but did the raiders support it? Press accounts make it sound like the money that should have been paid in taxes all wound up in Tortola.

    Ordinary people got loans, to the extent that was a benefit, but that was happening before IceSave.

  • Luna_Sea October 12, 2009, 6:02 pm

    @Alda

    …”These “I love Iceland BUT” comments are getting a little tiresome. Spare us the hypocrisy.”

    It is possible to love something dearly and find fault with it. I don’t see this as hypocrisy.

  • Petri October 12, 2009, 6:06 pm

    Frankly I don’t think your average Joe knows how the economy works, and can’t expect them to it’s just soooo complicated, so if the economy is booming of course they think the people making decisions are doing something right. Therefor it is bit harsh to blame it on the people who have elected their representatives, especially when most of the stuff happens behind closed doors.

    But that report on the household debts is just scary to read, I’ve always been really uncomfortable about living on debt that’s why I’m still renting and don’t even own a car, so it’s hard for me to understand how can people just live so much over their income! Maybe somebody can explain? Probably something to do with high inflation making it attractive and experts at banks pushing loans and recommending it..

    It seems there are no good solutions anymore, I just wish the best for all!

  • James October 12, 2009, 6:45 pm

    “I don’t see how Iceland could default with such small amounts”

    Eliza – Actually, several financial analysts have taken account of all the latest information and concluded that Iceland would almost certainly default if bound by the terms of the original agreement (although it’s possible that negotiations in a few years time could have restructured the repayment schedule to avoid that). As Bromley86 alludes, for there to have been a chance of a viable agreement, the negotiators on all sides should probably have originally accepted the guarantee in return for a much lower interest rate; that could at least have resulted in a viable repayment schedule for Althingi to consider.

  • Marc October 12, 2009, 6:48 pm

    The trouble for Iceland and its citizens is that unless the Netherlands & the UK are willing to work out a guilt-sharing agreement with a reasonable repayment schedule for the losses incurred, there really is no decent way for Iceland to resolve this. Now look at it from their perspective: they are not inclined to enter into a guilt-sharing agreement, it would not be appreciated by their voters. What are their risks? Unfortunately, they’re manageable. We’re talking a few billions here (far less than the amounts they get to juggle with each day). So in case Iceland defaults, they’ll receive a bit less money in the short term, but they get a political scapegoat for the deficits (quite valuable these days). And all is not lost. The IMF is mainly there to make sure that debts stick.

    That is the other part that is not often enough talked about. Everyone talks about the IMF as a provider of emergency funds. Alas, that is not what they are primarily there for. Their main function is to make sure that creditors interests are served in the best possible way. If the IMF had a slogan it would be: “Debt must be repaid, down to the last penny!”

    Now, you can applaud that or regret it, but it sure as hell is good knowing who you’re dealing with. Iceland is a small price to pay on the altar of universal debt servicing.

    And while we’re at it, you may not be aware of it but different rules apply to big countries. It’s a question of size.

  • Mark-Jan October 12, 2009, 7:28 pm

    How can the British and the Dutch control what the IMF is doing?

    @Fred

    I assume they know the drill and play the diplomacy & power projection game better as Iceland does. From what I have heared and read they got the EU IMF members behind them.

    Furthermore both the UK and the NL have seats in the Executive Board of the IMF.
    The Netherlands for instance represent a group of countries which also add to their voting power:

    Director: Age F.P. Bakker (Netherlands)
    Armenia 1,170
    Bosnia and Herzegovina 1,941
    Bulgaria 6,652
    Croatia 3,901
    Cyprus 1,646
    Georgia 1,753
    Israel 9,532
    Macedonia, former Yugoslav Republic of 939
    Moldova 1,482
    Montenegro 525
    Netherlands 51,874
    Romania 10,552
    Ukraine 13,970 105,937 4.78

    Add everything and you are pretty powerless if your country is Iceland and you have 117.6 Millions of SDR’s (vs 5,162.4 NL & 10,738.5 UK SDR’s) and your votes present 0.06 percent of the total votes.

  • Alexander E. October 12, 2009, 7:33 pm

    First of all – I think Alexandra is SHE (as some of readers assume she is he)

    Second.

    Both you and Alexandria make excellent and passionate points albeit coming from different ends.

    Passionate points by Alexandra? Give me a break…please.
    Or ask Alexandra to show a list of charities which authorized her to talk on their behalf. Who are those mysterious “we” and “our”?
    She sounds to me like one of the “managers” of such charity that was supposed to keep fund intact but decided “to invest” it into “internet bank”.
    So, Alexandra, first learn to talk “I” and take care of your personal problems – then talk for other people (if they ask you to do so).

    But it is Icelandic people that voted for the incompetent and corrupt government that failed to regulate and even encouraged the expansion of the banks that led to the ‘kreppa’.

    Eliza, look after your own “competent” government, please. And your “honest” bankers. As you just heading to the point Iceland crossed a year ago. So I really wish you luck.

    PS. Who encouraged Lehman Brothers, btw?

    What bothers me is that the lengthy legal complaint process (and its knock-on effects) will be extremely bad for Iceland and the judgement is very unlikely to be beneficial to Iceland.

    James.
    I doubt your doubt 🙂
    Guess why UK/NL authorities want to “settle” the matter outside court? I assume they have very real doubts about their success in case of legal battle. And more importantly – EU/EEA “managers” are scared by such legal investigation as it will show that it was THE SYSTEM that is broken not just few “bad vikings”.

    PS. UK Icesave depositors are not discriminated by Landsbanki. Those UK residence who had deposit at Lansbanki are fully covered. But Icesave depositors are different matter – cause Icesave UK was limited to UK residents only. You should read the rules of this “bank” first then complain.

    As to Icelanders not paying their debt – this is BS. Icelanders just don’t want to pay for crimes and mistakes made by others. Thta’s why the matter must go to a third party to decide – who owes what and whom. As I don’t trust neither G. Brown nor Johanna in the matter worth of several billions.

  • Alexander E. October 12, 2009, 7:35 pm

    Petri 10.12.09 at 6:06 pm

    Frankly I don’t think your average Joe knows how the economy works, and can’t expect them to it’s just soooo complicated, so if the economy is booming of course they think the people making decisions are doing something right. Therefor it is bit harsh to blame it on the people who have elected their representatives, especially when most of the stuff happens behind closed doors.

    Petri, are you talking about …what country actually?
    Sound like USA or UK for me 🙂
    Or even Latvia…

  • Adam October 12, 2009, 8:36 pm

    Mr. Jackson’s very fair article says inter alia “Loan packages from the IMF, a group of Nordic countries and Poland, combined with repayments to the British and Dutch governments for the Icesave debacle, will put Iceland nearly £6bn in debt by the year-end. The best estimates predict that it will take a generation to repay. ”

    As other comments have noted tho, the Icesave money isn’t new money, but partial recognition of a debt which the Icelandic government guaranteed. The other money is ‘new’ – the real question for Icelanders is how much of it they will need to make partially good their other (national) debts and how much will actually be available for imports. I would be less worried about the Icesave money than the use of the other obligations which Iceland wants to incur…

  • Bromley86 October 12, 2009, 9:02 pm

    >PS. UK Icesave depositors are not discriminated by Landsbanki. Those UK residence who had deposit at Lansbanki are fully covered. But Icesave depositors are different matter – cause Icesave UK was limited to UK residents only. You should read the rules of this “bank” first then complain.

    I think it’s fair to say (yet again 🙂 ) that as not a single article, legal opinion or leaked government document has discussed this, that you are flat-out wrong in your interpretation.

  • Michael Lewis October 12, 2009, 10:36 pm

    Icelandic banking was a disaster waiting to happen and expected to happen. Given the state of Iceland, anyone putting money into a 7% ‘certain bet’ – should have their head examined. That governments knew there were problems is certain – however the manner in which it was cleared up leaves something to be desired.

    No doubt the privatization of Icelandic banks was of great benefit to Iceland. However these banks should have been allowed to fail, as in the UK, Northern Rock et al. should have been allowed to fail.
    Sadly in all sorts of ways, thats not happening. Far better to take the pain and emerge stronger than have the Soviet style economic planning that the UK, US and EU seem to be indulging in..

    Where governments should step in is to guarantee deposit holders. The issue with Icesave is – did the Icelandic government do that for deposits of its registered banks? If so, then forget , purchasing power excuses, the Icelandic state is responsible for this debt.

    However, lets be honest here – is the US government repaying its debt – of course not, its debasing its currency by printing more of it. So too the UK government (annoyingly as my wife and I want to buy a house in NZ) – anyone can see that printing money and stoking inflation is just a not so subtle way of defaulting on debt.

    You know things must be bad if people serious suggest that the ‘European Union’ is a ‘rescue’ .

    What I do know is this: if Barclays or RBS had opened foreign subsidiaries and went bust, I would not want to be picking up the tab for foreign depositors. Regardless of the legal niceties, even if it costs me that the UK government bails out Icesavers (or idiots as I’d call them) , I honestly think its simply wrong to foist -all- this debt onto a small nation.

  • Fred October 12, 2009, 11:28 pm

    This discussion reminds me that Macchiavelli said a man will sooner forgive the loss of his father than the loss of his patrimony. Empathy seems to go out the window when money is involved.