Key points: loan paid in full over six years, no interest from 2009-2011, 2.5-3.5 interest above LIBOR after that [they are around 1 percent today].
Evidently this is what Iceland was demanding before the talks broke down yesterday.
Iceland’s Icesave demands leaked
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some offers are made expressly to be rejected… to fudge/obfuscate, to buy time, to shift the onus on the other… sometimes it’s made in a subtle manner, sometime’s not…
The question is : do icelanders really “believe” their offer?
I still think the Icelandic side is on shaky ground here – they are objecting to the same interest rate as the Nordic loans! Are the Icelandic government going to complain about the Norwegian and other Nordic countries “profiteering” margins on that loan too? Not to mention the IMF…
To paraphrase Hamlet (who was Danish!)
“The negotiator doth protest too much, methinks.”
Andrew,
The difference is that this money is being demanded under duress. The Nordic loans are aid given in good faith. They are making an investment in the Icelandic government in order to give them aid in return for financial reward.
The British and the Dutch ones were not given under the same conditions. The money was “loaned” unilaterally, and they are now demanding money while committing extortion. I agree with the Icelandic sentiment that while they should be paying back the British and Dutch under the principle of the time value of money, but not a dime more. This was not an investment.
It always was silly to believe any deal could be done when the Dutch government just collapsed and the minister of Finance (and leader of the Worker’s Party) desperately needs good news to contain his election defeat. Gordon Brown is in a position that is not dissimilar, although I have the feeling that the British press aren’t paying too much attention to this.
This is the sort of song and dance that debtors and creditors have to go through before reaching an agreement. UK & Netherlands are pointing at Iceland’s credit rating, EU accession and/or IMF funds. Iceland is pointing at its population, the potential for a long court case and/or the quality of the leftover assets. Given the smallish amount of money we are talking about, Iceland could very well find alternatives to bowing to the pressure of the above states. I did hear some interesting proposals already.
I found this article at Financial Times:
https://www.ft.com/cms/s/0/74e86d86-22dd-11df-8942-00144feab49a.html
First line of defense are the private banks which went poof. The second line of defense are the neighboring countries who might be in the same position soon. The third line of defense is the IMF and they are fierce austerity nuts. Better to walk slowly and surely than to rush this.
Personally, my opinion only, is to stand firm. The negotiators appear to know what they are doing and so do the people!
It shouldn’t be any surprise that there is a good deal of bluff involved in negotiations. Part of that involves the implied threat by the British and Dutch that if displeased they’ll have the EU and IMF go nuclear on Iceland. On Iceland’s part that their citizens will tell the British and Dutch to take all their demands and shove it. Presumably some equitable middle ground might be found in the end.
But an important part of that equation can be a referendum whereby it is made clearly and publicly known that the citizen’s of Iceland are not willing to just roll over. In that context it doesn’t much matter whether they are voting on a former (and worse) proposal, only that they won’t be sheared without complaining.
The offer of the British and Dutch to waive interest payments for two years sounds much like the offers of American credit card companies proffering introductory zero interest offers, which of course shortly then go sky high. If Iceland were to pay no interest then obviously, given inflation, they would not be repaying the full guaranteed depositor amounts. But asking for even a cent more than this in interest sounds more like a loan shark, or that the British and Dutch are seeking to unduly profit by Iceland’s misfortune.
Or just negotiation.
@idunn
“But asking for even a cent more than this in interest sounds more like a loan shark, or that the British and Dutch are seeking to unduly profit by Iceland’s misfortune”
loan shark? look at the spread of the Greek debt compared to Germany’s, it’s way higher than the 2.75% asked for Iceland and Greek is in a marginally better situation than Iceland.
The spread is not necessarily undue profit, it represents the “country risk”: by asking “only” 2.75% while keeping the liability, UK+NL are offering a bargain to Iceland since they would still hold the risk of Iceland defaulting later: nobody on the open market would buy at that spread for a nation that is technically defaulting in all but name with a rating that if not junk (yet) should be junk.
@Tom Thumb
“IMF and they are fierce austerity nuts”
of course they are: their mission is help a nation to restore macreconomic viable conditions and stability. Help is not free and rightly so: there are conditions attached.
When they intervene, it’s because the nation in distress asks for it, when the damage is already done.
IMF “forces” macroeconomic responsibility and sound practices and that translates usually in austerity yes. And that of course, means loss of sovereignty, since the nations is not free to do what it wants. Rightly so (not being free).
The fault however is not IMF’s but the nation’s, most often because of irresponsible policies.
It’s like a junkie that asks for help and the IMF says “ok, but I only help if you stop taking drugs and go on therapy. I’m not going to help giving you money for you just to keep on with your addiction that brought you in the present condition”.
Don’t like FMI? Don’t call it, they won’t bother you.
Call it and don’t like the conditions? Fine: you part your ways amicably. N help is given of course.
There is no obligation to help. FMI is no charity for beggars. And beggars cant’t be picky choosers.
Hiss as much as possible that’s all you can really do anyway, there’s bigger fish around Greece for example at 50 billion thereabouts, Iceland icesave is small beer except for Iceland of course, get everly whatshername to scoop as many assets as poss.
@Lino
I think, last year the negotiators of the (new) government (without the opposition parties directly involved) had been rather incompetent than insincere. In my view this has changed since all old four parties decided to become friends and negotiate united, backed by some foreign lawyers.
The degree of insincerity increased most perceivably with the petition, leading up to this makeshift direct democracy stunt. People signed believing to vote for non-payment. After delivering the results of the petition to the president the organisators hypocritically told everybody that they never questioned that Iceland was indeed prepared to pay, just not at the terms at hand. But the actions tell a different story.
kevin oconnor
“there’s bigger fish around Greece for example at 50 billion thereabouts”
hear hear: and they are “smart” and ruthless, individually and as colletive 🙂
and in a way, they’re taking advantage of Ireland sacrifices as well: what’s the point of being virtuous if you can get away with your profligacy?
@Joerg
“the negotiators of the (new) government (without the opposition parties directly involved) had been rather incompetent”
even worse, I prefer to have buccaneers on my team working for me than incompetents…
“backed by some foreign lawyers”
… who are doing their backing “pro bono”, for free , having at heart only Iceland’s interest… Joerg don’t be naive (I know you’re not).
Some lawyer will have you enter litigation even knowing you would lose: they (lawyer) would not anyway.
Unless these foreign lawyers are paid only if Iceland wins, I would be wary “of help”: what and how are these lawyers paid?