The financial experiment that is Iceland continues into a very interesting phase. Ireland should watch very closely to inform its own strategy to manage national banking collapse. Ann Pettifor has no doubts about the Icelandic president’s decision to refuse to sign off on the repayment plan and go to the people for a decision ” At last! A political leader that sides with the people, not the bankers.” (link to article).
Ann had suggested this very course to Icelanders citing the success of the 2000 Jubilee campaign.
About one quarter of Iceland’s voters – 56,000 people – recently signed a petition which urges President Olaf Ragnar Grimsson to ‘drop the debt’ owed to the British and Dutch governments. This petition reflects the view of 70% of Icelanders, according to a poll taken in August.
This debt – which amounts to 12,000 Euros per Icelandic citizen – is the result of reckless lending by an unregulated, private bank – and reckless, unregulated borrowing by British and Dutch depositors that earned high real rates of interest on their risky deposits – until things went wrong.
For political reasons, these depositors were bailed out by the British and Dutch governments – at a cost of about 50 Euros per citizen.
A country with a population the size of the city of Leicester – 317,000 – is now asked to bear the full burden of losses incurred by a private bank, and by private citizens in two countries with a joint population of 76 million.
Icelanders – the people of countries as diverse as Rwanda, the Phillipines and Argentina feel your pain. Millions of Jubilee 2000 campaigners would salute your struggle to drop the debt. They would urge you to follow their example, and keep up the pressure. After all they did not give up until more than $100 billion of debt owed by 42 countries was acknowledged as unpayable by powerful creditors.
You dear people of Iceland, can do the same. (link to article)
Ambrose Evans Pritchard of the Telegraph is more circumspect, perhaps because UK savers are involved but nevertheless outlines a convincing justification for the disgruntlement of Icelanders.
Iceland’s Left-wing coalition – which unseated free marketeers in February’s “Saucepan Revolution” – has backed the Icesave terms, deeming it is the only way for Iceland to move beyond the disastrous episode. The petitioners said they accept that Iceland’s people should foot part of the bill, but object to the “Versailles” terms: a loan at 5.55pc interest, to be repaid within 15 years. The central banks said this will increase Iceland’s public debt by 20pc of GDP.
A report by Sweden’s Riksbank said Britain and Europe share blame for the fiasco. It said “absurd” EU rules – which cover Iceland indirectly – told states to set up a “guarantee scheme” for banks, but never said taxpayers were liable for losses.
The reports added that the UK “hardly bothered” to inform savers that the schemes were ill-funded. “The conclusion is clear: the EU host countries (UK and Holland) are also to blame for Iceland’s disaster. It would be reasonable that they carry some of the burden. It takes two to tango,” it said.
The UK Financial Services Authority said it was unable to stop Icelandic banks raising deposits in the UK under the EU’s “passport” system, even when they began milking UK customers to cover losses at home.
Whatever the rights and wrongs, Iceland was by then already being crushed by a financial tsunami. Britain’s use of anti-terror laws at that moment will not sit pretty in diplomatic history. (link to article)
