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For freedom and life

So, the Icesave debate rages on here in Niceland and is the main news fodder in any given news hour or current affairs programme these days.

Brief recap for anyone who’s just joined us: the debate revolves around whether or not the Icelandic taxpayer should be made liable for the colossal debts incurred when Landsbanki’s online banking unit Icesave collapsed in the UK and Netherlands last fall. Transposed onto the UK or US, the debt would be equivalent to the UK having to pay £700 billion or the US $5.6 trillion – in a foreign currency.

An agreement was signed a few weeks ago with British and Dutch state negotiators in which Iceland agreed to take on the Icesave debt*, albeit with a clause stipulating that the agreement would have to be ratified by the Icelandic parliament. That agreement was signed under massive pressure from the EU and the International Monetary Fund, which threatened to cut off Iceland’s current aid package until the Icesave dispute was settled. Indeed, the most recent IMF loan payment, which was to be paid earlier this month, was postponed until the end of August – all because Icesave was still being debated in parliament. The EU, also, has made it clear that there will be no aid for Iceland until it faces up to its “responsibilities”.

The Icesave agreement is wildly controversial. You have two extremes – the people who are absolutely adamant that the Icelandic public should NOT have to pay for the f*ck ups of a bunch of reckless bankers, and those who feel that we HAVE TO pay, if for no other reason than that we’ll be totally cut off from the international community if we don’t and will then suffer another economic collapse that will be the kiss of death for this country. Literally.

Then there are the myriad people placed  somewhere between those two extremes – and that seems to be where the debate is at the moment. More specifically, the majority of MPs say they will not ratify the agreement unless there are some serious amendments made. Two main ones have been primarily under discussion – a clause that would limit the sovereign guarantee for the debt [basically meaning that we won’t be forced to pay something that we simply cannot pay], and another that would ensure that the creditors will not be able to take control of our resources if all else fails.

To sum up: This country is fighting for its freedom and its life.

For weeks now, most of us have had the impression that the external world looked upon us as a bunch of greedy incompetents who like irresponsible children were trying to wrangle our way out of doing the right thing. However, in just the last few days the wind has seemed to turn ever-so slightly. First, there was Eva Joly’s wonderfully supportive and outspoken stance on Iceland’s behalf. Then today, there was an editorial in the Financial Times in support of Iceland’s plight. Also today, Lee Buchheit, an American expert on sovereign debt, had a long meeting with parliament’s budget committee and had this to say when he emerged – in short, that ratifying the Icesave agreement at this time is premature, since it is impossible to determine the amount of the debt until we can see how far the outstanding assets of Landsbanki will go towards covering it.

The frustrating thing is that people like Mr. Buchheit are being called in NOW, when everything is at boiling point. Why couldn’t he have been called in earlier, say before the Icelandic negotiating committee met with the British and Dutch negotiators? Indeed, why could Icelandic authorities not have recruited his assistance in the negotiations? Because the word on the street is that the [amateurish] Icelandic negotiators were no match for their hard-nosed British and Dutch counterparts and that they basically got bulldozed. Having someone like Mr Buchheit or Mme Joly on board would undoubtedly have made a massive difference.

At any rate, it is comforting to know that the voice of tiny little Iceland is being heard in some capacity, whatever the ultimate outcome of the Icesave debate turns out to be.

A CHILL IN THE AIR
This evening, at least. I spent a couple of hours at a meeting of the Ministry of Ideas and was, as ever, totally inspired by the excellent work the grass root in Iceland is doing. More about that later, perhaps. Walking back home along the sea, I realized how cold it had gotten. Fall just around the corner. Currently 11°C [52F]. Sunrise was at 5:08 am and sunset at 9:55 pm.

* Whatever is left over when Landsbanki’s assets have been sold towards the debt, which could take years.

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  • Stephen Cowdery August 13, 2009, 1:43 am

    I’m starting to have a feeling that my October trip to Iceland may be more interesting than I had planned!

  • Paul H August 13, 2009, 1:49 am

    This is quite a storm for Iceland to weather.
    I have faith in the tenacity of Icelanders to ride it out.

  • JoeInVegas August 13, 2009, 1:56 am

    Maybe you can spread out repayment, say at the rate of $1 per account per year? (no intereste accumulation)

  • Gagnráðr DE August 13, 2009, 2:28 am

    The old saying is: If I owe the bank a thousand dollars, I’ve got a problem. If I owe the bank a million dollars, then the bank has a problem.

    In Iceland’s case, the “bank” is the UK & NL governments who would like to scoop up the good fish, clean water, cheap electricity, strategic location, educated population, etc. at a bargain price.

    By simply saying no, you’ve got them over a barrel.

    Iceland, which has a reputation for tough negotiation and determined independence, should tell the EU to use its good offices to track down the oligarchs’ hidden accounts, and collect the debts there.

  • David Raven August 13, 2009, 6:00 am

    I am so pleased to have seen the positive comments made by the Financial Times in support of Iceland’s citizens. It may also be recognition for this excellent Blog which is doing so much to keep Iceland in the public eye. I have been writing in the UK about Iceland on my niche publication idaventry.com at a time when mainstream media was taking no real interest. Our niche publications can make a difference and hopefully will help Iceland overcome this huge crisis with dignity and supported by the world community as they deserve.

  • Ljósmynd DE August 13, 2009, 6:58 am

    The impression of Iceland trying to wrangle its way out of doing the right thing may have been encouraged by the notion that the current IP opposition party, which had first signed an agreement about Icesave last year, when they were still in charge, is now heavily opposed to it. It’s just the party, which was mainly responsible for letting regulators sleep on duty. There is some dishonesty about this. It should not just be a matter of perspective – from inside or outside of government.

    And I wonder, what IP would have done, if they were still in power. Or what they will do, if they return there – sign this deal anyway?

    Anyway, it’s promising, that Iceland is now calling in experts from abroad and doing more lobbying in the EU on behalf of its case, even if this should have been done much earlier.

  • Mark August 13, 2009, 8:21 am

    In Iceland’s case, the “bank” is the UK & NL governments who would like to scoop up the good fish, clean water, cheap electricity, strategic location, educated population, etc. at a bargain price.

    I can’t talk for Holland, but Britain doesn’t care about any of those things, with the exception of electricity. But that’s broadly irrelevant because the cost of getting to the UK would outstrip the benefit of aquiring it.

    By simply saying no, you’ve got them over a barrel.

    The UK has a seat on the boards of the IMF and World Bank. Iceland saying, “we won’t pay” would mean the IMF wouldn’t be able to release any funds.

    The thing is, from a man-on-the-street perspective in Britain, this is a matter of fairness. We sort out the mess our banks have caused, you sort out yours. Quid pro quo

    I know that “fair” isn’t reasonable. Placing that much debt on such a small number of people is absurd but, most Britons (and Dutch I assume) are only vaguely aware where Iceland is.

    Apart from Magum Magnusson and Bjorn punching that photographer I’m not sure anybody give the country a single thought.

    If someone actually had a platform in the UK to make Iceland’s point it would probably be easier on the country, but in a time of massive job loss and deepening recession, it won’t be considered important enough.

  • Bromley86 August 13, 2009, 9:24 am

    in short, that ratifying the Icesave agreement at this time is premature, since it is impossible to determine the amount of the debt until we can see how far the outstanding assets of Landsbanki will go towards covering it.

    It’s just my unsupported opinion, but I believe that it has been this attitude that has been what’s led us to where we are.

    In October, it was Mathiesen’s refusal to unequivocally guarantee that led to the Freezing Order.

    The next ten months has seen that guarantee accepted (under duress), but then at every turn it’s been about attempting to get out of it rather than trying to cooperate and get good terms.

    For example, the bond suggestion from the Icelandic negotiators in April, which was just a clumsy way of trying to avoid giving a state guarantee and taking the loan. That means that between November, when the guarantee was accepted by Mathiesen and Oddsson, and April, when the bond idea was flatly refused by the UK & NL, the Icelandic negotiators had been focussed on avoiding the state guarantee rather than securing good terms for the loan. That’s 70% of their time wasted, as well as I suspect a hardening of opinion against them on the other side of the table.

    Bond idea:
    http://www.island.is/media/frettir/60.pdf
    http://www.island.is/media/frettir/65.pdf
    Response:
    http://www.island.is/media/frettir/64.pdf
    http://www.island.is/media/frettir/66.pdf

    BTW, all that originated under the IP government.

  • Flygill August 13, 2009, 11:25 am

    The UK has recently printed 175 billion pounds out of thin air as part of its policy of “quantitative easing”, which basically means the government borrows from itself. And the amount will soon rise to 250 billion. So the amount of money “loaned”, or will loan, to Iceland is nothing but computer-account money, and the UK money is charging interest on that. And yet the British government continues to maintain this story that the Icelandic government has effectively cheated UK Icesave depositors of billions of pounds of real money. As long as the UK is printing money out of nothing, why not print up an extra billion or two?
    The British government itself owes a lot of money to foreigners, and they intend to pay it back — by issuing Treasury Bonds that have value created only by devaluing its own currency! What a bunch of hypocrites!
    And what about the creditors, apart from the Icesave depositors, who must be paid back from the Landsbanki assets in Iceland (electricity rights and fish-quotas)? They are not the same creditors who suffered the loss, since lots of the debt was transferred from one party to another in the bank debt auctions in January, from some investment banks to other investment banks and hedge-funds.
    Once you start looking at the details, you can’t say that the Icesave debt is going to innocent parties who have suffered real losses – no, it is must be paid back for ideological reasons, to maintain the international financiers death-grip on debtor nations and their resources. What would happen if the IMF and EU were to grant little Iceland debt-relief? That would set a terrible precedent and threaten the whole system! You can’t have countries like Iceland and Ecuador repudiating their debt, oh no, Latvia and Ukraine and Ireland would soon do the same.

  • WiseWoman August 13, 2009, 11:35 am

    Have all the assets from the guys who got Iceland into this mess also been taken by the government? I realize that at this point, a yacht here or there or a fancy car is just peanuts. But this was a few people pulling the Icelanders and the world over the table. The Icelandic populace is responsible for voting the clowns into office over and over again, so they should not get off scot-free. But the amount they are being expected to pay back is just not do-able. Maybe pay them in fish – at prices you set 😉

    Thanks for all the good links.

  • Dave Hambidge August 13, 2009, 12:41 pm

    Alda, many thanks for keeping us uptodate on matters.

    HMG here in UK is in a very similar mess to Iceland, as flygil notes above; it is just taking longer to come to the boil. My nation holds just as much responsiblity for the huge cockups in financial management as anyone else, arguably the central blame.

    But to admit that fully in public would be political suicide, even though the currently elected minority ‘dictatorship’ is almost sure to loose power by next spring at the latest. It is hanging in there, talking tough and hoping to all the deities that someut comes to rescue them. But apart from a world war, invasion from outer space or other apocalyptic event, what will?

    I do wonder if the furore about our MP’s fraudulent expenses was ‘allowed’ into the public media to distract us from the real horrors?

    KUTGW on behalf of sanity and reason.

    dave

  • Gagnráðr DE August 13, 2009, 2:20 pm

    Flygill wrote:

    Once you start looking at the details, you can’t say that the Icesave debt is going to innocent parties who have suffered real losses – no, it is must be paid back for ideological reasons, to maintain the international financiers death-grip on debtor nations and their resources.

    Hear, hear!

  • Lee August 13, 2009, 2:48 pm

    Icelandic negotiators were no match for their hard-nosed British and Dutch counterparts and that they basically got bulldozed

    And given it’s hundreds of times easier to change terms and conditions during negotiation than it is after agreements are signed, I wonder why on earth Iceland didn’t send in the best of the best to negotiate. I’m sure the British public would have been fine with the original agreements had they contained those couple of disclaimers.

  • Nigel Goddard August 13, 2009, 4:35 pm

    Just back from a great trip to Iceland, which I knew almost nothing about before going. Great country, great people. The Landmannalaugar- Þórsmörk hike was an adventure, especially the swollen rivers! Everyone very friendly and helpful, despite that I’m from the UK (well, Scotland).

    Anyway I was shocked and embarrassed to hear about how the UK is treating Iceland. You should absolutely not give up control of your resources, whatever. What you need to do is develop your energy resources to the point you don’t need to import oil. Then the world will be coming to you. Alcan is willing to ship bauxite all the way from Australia just because you have such great energy resources. No other country on earth is already achieving non-fossil source for 70-80% of needs (I think). You might have to undergo some privations for a while, but I think it will be worth it (I know, easy for me to say…). There must be some countries that will trade with you for what you need. China needs your energy technology, for one.

  • Bill August 13, 2009, 11:46 pm

    Mark, you were doing fine until your pivot into the Brit- and Dutch-on-the-street’s ignorance of Iceland. If true, that’s sad but irrelevant here. Not sure what linkage you’re driving at, but it sure smells like condescension.

    I really hope the Icelandic people and government will be very very careful and vigilant at this critical point. The proposed amendment about keeping your resources protected in this matter is so important. My god, it’s appalling but painfully clear what could happen if Iceland said they can’t pay – fine, we’ll just take over your resources. Very scary.

    Alda, thanks for your work in keeping Iceland and Icelanders in the thoughts of those of us who are well aware of where and who you are! 🙂

  • Mike Stasse October 6, 2009, 11:19 am

    Personally…..? I’d tell’em to go f@^k themselves.
    There’s one REALLY serious issue that nobody who’s commented here seems to understand: the debts of the world will never, can never be repaid. Why? Because this idiotic system utterly 100% relies on economic growth to repay all debts plus the interest owing on those debts, and Peak Oil plus Climate Change will see to it that economic growth ends, for good. We can’t continue growing the population forever to consume consume consume (not to mention go into further debt!) so it’s simply impossible to repay debts. That being the case, all debts must, will be one day CANCELED…. Period.

    The Revolution starts in Iceland, and I’m proud of you guys…..!!

    Mike in Australia.
    http://www.chrismartenson.com/crashcourse

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