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The IMF speaks out on *cough* Icesave. And a few other things.

So the International Monetary Fund has started sending me mail. Press releases, that sort of thing. Entirely unsolicited. In fact, the first time they did, the email landed in my spam folder with the warning: THIS PERSON MAY NOT BE WHO THEY CLAIM TO BE – since, let’s face it, why would the IMF be sending me mail? Which of course is a pure testament to Google’s infinite wisdom and a sign that we should just stop trying to run our own affairs and let Google do it.

Not that I mind. I’m happy to have a direct line to the IMF, especially since their press officer seems really nice and actually addresses me with my real name, rather than with something like PRESS RELEASE or A MESSAGE FROM THE ANARCHISTS SOCIETY OF TIMBUKTU. And besides, according to Joseph Stiglitz the IMF has given Iceland a fairly sweet deal in comparison to Argentina, for example, so you know, we can be friendly. The only thing that worries me is that it may just do in my street cred. I figure when the IMF has started sending you mail you’re no longer a “cult blogsite” but have deteriorated to something horribly dull and mainstream. Next stop, The Big Blog Geriatric Hospice in the Sky.


This latest release from the IMF comes in response to a letter sent by a group of “concerned citizens” to its Managing Director, Dominique Strauss-Kahn. I don’t know what the original letter was about, but the answer is pretty standalone and informative, and Mr Strauss-Kahn gets props for at least responding – something many public officials would to well to emulate. Excerpt:

First, on the Icesave dispute. Resolution of this dispute has never been a condition of the IMF-supported program. The IMF is not supposed to involve itself in bilateral disputes between its member countries and did not do so in this instance. However, the Icesave dispute did indirectly affect the timing of the program’s first review since it held up needed financing from Nordic countries (for whom resolution of this dispute was a condition). I am sure you will agree that the government’s program must be internally consistent—it makes no sense to agree on a macroeconomic framework if the money is not available to finance those policies.

The full letter is available here.

Also, the IMF has just released a new video on Iceland, which also has some good information on our current predicament and status, to wit:

There’s something for eveyone: even those of you who don’t give a rat’s ass about the Icelandic economy can look at the pictures.

The kind that makes your face feel really tight, like you’d open a big gash next to your mouth if you cracked a smile. Kinda bleh, really, although it would be worse if it was windy like yesterday. It’s 4°C according to Yahoo [coulda sworn it was less] [that’s 39F], and the sun came up at 9.58. set at 4.25.



Comments on this entry are closed.

  • Melvin Godfried November 16, 2009, 7:47 pm

    Iceland has the opportunity to get back on it’s feet. Let’s get some ideas from Landsvirkjun and Orkuveita ReykjavÍk who understand how to price the country’s electricity. They can go out and sell this stuff for aurar on the króna Take a look at operations like Fjarðaál, how can you lose?

  • Alexander E. November 16, 2009, 9:01 pm

    For those interested in languagesIMF in Icelandic 🙂

    Alda, thanks for the nice video – good example of talking eggheads…

  • Lára Hanna November 17, 2009, 12:06 am

    I was one of the concerned citizens who sent the letter to Strauss-Kahn and published it on my blog – in both English and Icelandic. Here it is in case someone wants to read it:


  • Stephen Cowdery November 17, 2009, 2:22 am

    … “Next stop, The Big Blog Geriatric Hospice in the Sky.”

    My nightmare, exactly.

  • D_Boone November 17, 2009, 6:25 am

    The IMF certainly seem to want to push their “talking points”
    * the review delays were not due to them
    * they are being “the good guys” in dealing with Iceland and their bad historical reputation is not relevant in this case.
    * Iceland “aka the government in power at the time” was silly to allow the banks to grow to the size they were and take the risks they did

    The question though is what points were carefully not even mentioned…..

  • Ásta Hafberg November 17, 2009, 7:20 am

    The letter to IMF was sent by a group of people, me included,who do not really by into the assistance effect of the IMF. We are all kinds of people in this group, and this letter we got from Strauss Kahn did not make us all feel warm and cosy ; ) if you know what i mean.
    How can you trust a institution who makes their own rewiew on their own work, that can not be objectiv or in any way trustworthy.
    The letter to Strauss Kahn is here in english: http://thjodarsalin.blog.is/blog/thjodarsalin/entry/974168/

  • Marc November 17, 2009, 10:38 am

    I have read the letter to the IMF and applaud the polite way in which the request has been made. Alas, the reply from the IMF cannot be interpreted in any other way than that mere mortals should not be criticising the gods.

    Obviously the IMF does not care what Icelandic citizens (or any other citizens for that matter) think of IMF policies. And they will not start caring because of the dire situation Iceland is in. As he coolly pointed out, it is always possible to find a situation that is even worse. Let them eat cake!

    There is only one single way to make the IMF listen to your arguments, and that is to challenge the very fundamentals on which it is built. The IMF is a financier of last resort that has a stated mission of making sovereign creditors whole. If Iceland can threaten the IMF with sovereign default they will listen. Argentina has done just that (and defaulted). The IMF still hasn’t recovered from the shock.

    So, you should make it your mission to campaign for sovereign default until the IMF is willing to spend time to be more cooperative.

  • Bromley86 November 17, 2009, 10:48 am

    Please tell me that the letter didn’t sound quite so arrogant in Icelandic! You should consider it an honour! 🙂

  • Peter - London November 17, 2009, 10:57 am

    “the Icesave dispute did indirectly affect the timing of the program’s first review since it held up needed financing from Nordic countries (for whom resolution of this dispute was a condition)”

    So its wasn’t the UK and Holland dictating terms to the IMF but actually The Nordic countries? Friends, eh?

  • Ásta Hafberg November 17, 2009, 12:23 pm

    Bromley 86 arrogant or not, at least we got a answear ; )

  • Bromley86 November 17, 2009, 2:09 pm

    I was thinking exactly that Asta. “Squeaky wheel gets the grease” works again 🙂 .

    BTW, which parts of the reply made you feel less than cosy? What I took awy from the reply is that Iceland can choose to walk away from the IMF whether it wants to.

  • Bromley86 November 17, 2009, 2:09 pm


  • James November 17, 2009, 3:22 pm

    I guess the letter’s filmmaker signatory came up with the dramatic concept of “You should consider it an honour to talk to me about the loan I need”. It could have been even more dramatic if they’d watched The Godfather just before writing that letter: “We’re gonna make you an offer you can’t refuse”…

    Nice video, BTW.

  • kevin o'connor waterford Ireland November 17, 2009, 5:04 pm

    300 % of GDP live on Fresh air for 3 yrs debts repaid, more realistic say 10 % of GDP for the next 30 years kind of sounds like eternity, this is at scale of UK owing the yanks for WW2 just finished paying just a few years ago, plus the adding interest thing, what a mess.You could just default on the whole thing replace all imports with local stuff where possible and then just seal youself off from the rest of the world like Japan did till that admiral perry guy sailed into Tokio harbour sometime around 1850, Iceland would become the mysterious island that time forgot, kind of freaky like some sci-fi movie.

  • Michael Lewis November 17, 2009, 5:05 pm

    “Argentina has done just that (and defaulted). The IMF still hasn’t recovered from the shock. ”

    Argentina defaulted some time ago, and they still pay the price for that default. Ecaudor recently defaulted and I don’t think they’ve really benefited. Defaulting only really works if you have no need to borrow in the future. e.g. A very rich gulf state perhaps. But if you are in that position, the chances are , you didn’t need to be borrowing in the first place.

  • Lavitica Gable@yahoo.com November 18, 2009, 7:39 pm

    I am rather new to this Icesave thins but what is the cough thing? I don´t understand this but my English isn´t the best.

  • Alexander E. November 18, 2009, 10:23 pm

    but what is the cough thing?

    Lavitica. You should skip *cough* – then the title would make sense.
    It is not English – it’s “internet” slang to express something you do when typing. So you can’t hear her coughing but you know she was coughing.
    Alda just have an allergy to the word “Icesave” so she is coughing every time she has to type it or hear it 😉

  • alda November 18, 2009, 10:34 pm

    Thank you, Alexander!

    Lavitica – *cough* just means we’d rather not say the “I” word around here. 😉

  • Marc November 23, 2009, 2:51 pm

    @ Michael Lewis

    You present the argument against defaulting from the perspective of the IMF. Since the IMF is the lender of last resort, eternal wrath will be bestowed on you when you send them packing. No other lender will want to risk lending to a country that has shown that much contempt to its creditors. In fact, you are obviously right, but you are very wrong as well.
    The classic case of a country that goes to the IMF is a country that has been steadily borrowing more and more money in foreign currency, often to fund a domestic deficit of political will to sanitise the policies. Then suddenly an external shock exposes the frailty of the financial situation and all possible problems start hitting the country at once. Next thing you know they’re at the doorstep of the IMF and the IMF can be used as the bogeyman to implement some of the overdue changes.
    I would argue that Iceland (much like Ecuador) does not fit the description of the classic case and would benefit greatly by defaulting to the Banking debts.
    1. There are only a few countries that will fall victim to that decision, most other countries couldn’t care less.
    2. It is not Iceland that has been borrowing all this money. It was Iceland based banks.
    3. Though Iceland does have some political problems, it would be hard to argue that these problems are in any way defined by an overspending government that is too weak to rein in social benefits the country cannot afford.

    About Ecuador. Ecuador has successfully argued that the lending terms they defaulted on were agreed on fraudulently. Since they bought back their debts (well below par) they are not in default anymore. Ecuador (and all sovereign debtors for that matter) HAS benefitted from defaulting on this bond. They have shifted the power in the creditor/debtor relationship significantly back to the debtors. Given the wave of sovereign defaults that will hit us in the coming 5 to 10 years, Iceland should consider its position very carefully and default should not be ruled out beforehand. Neither should it be the preferred path out of this misery. It’s a careful dance, and though Iceland is not leading it, neither should they allow being trampled on.

  • Eliza November 23, 2009, 6:53 pm

    Icesave ratification is a precondition for the Nordic loans because they want the UK and Dutch loans to be disbursed before theirs, so that Nordic money does not end up in the UK and Dutch coffers. The IMF does not have such bias.

  • Sam December 15, 2009, 8:27 pm

    @Marc, MichaelLewis

    Argentina’s default and its expulsion of the IMF are two separate but related events.

    It defaulted around 2001. Argentina agreed to pay back some of its debt (at the time $141 bn), just on more favorable terms.

    In 2005 (2006?) , the IMF was shown the door. The dismissal was not a unilaterally made decision though; Argentina dipped into its central bank reserves to pay back the IMF. The IMF, wanting to save face, praised Argentina for paying it pack, but Pres. Kirchner, in reality was tired of their interference. But didn’t exactly ruin the country’s credit rating by getting shot of them.