The European Free Trade Association (EFTA) yesterday sent a letter outlining its decision that Iceland is legally bound to insure the minimum deposit guarantee to British and Dutch Icesave account holders. The guarantee is part of Iceland’s EEA (European Economic Area) membership agreement.
The minimum depositors’ guarantee is EUR 20,000 per saver in the failed Icesave internet savings accounts which were run as a branch of Landsbanki before it collapsed in autumn 2008. The EFTA report states that the UK and the Netherlands have reimbursed their own savers and that Iceland’s severe recession does not diminish the country’s obligation to pay the two governments back.
The Icelandic government had insisted in a letter to the EFTA that the existence of a depositors’ guarantee fund in the country was enough to fulfil the requirements of the EU directive on cross border banking and also that the rules do not fully apply in the case of the collapse of an entire national banking system (as happened in Iceland). The EFTA disagrees with this reading of European law.
The EFTA president, Per Sanderund explained that the EU directive guarantees that each depositor is insured up to EUR 20,000 and that all nations must make sure they guarantee that insurance without question. This simple rule is extremely important to make customers feel that their savings are safe, he said.
Shortly after the fall of Landsbanki the British and Dutch governments unilaterally decided to refund savers in their countries. In the UK, 300,000 savers were paid GBP 4.5 billion, and under the directive Iceland is responsible for GBP 2.1 billion of that. The Dutch refunded EUR 1.53 billion to 118,000 savers and Iceland is responsible for EUR 1.34 billion, according to the EFTA.
The letter also criticises the Icelandic government for guaranteeing domestic depositors but not those in overseas branches of Icelandic banks – a breach of European rules, Visir.is reports.
The Icelandic government has two months to respond formally to the letter. If Iceland does not respond appropriately, the letter could be the first step in removing Iceland from the EEA.
“The EFTA is fully aware that Iceland, the UK and the Netherlands have tried to agree a solution to the issue. If such a solution is found there will be no need for further EFTA action,” said Per Sanderud.
Talks broke down in the late winter between the three countries and all agreed that a new deal was highly unlikely before elections in the UK and the Netherlands. With Dutch elections scheduled for 9th June, the three countries will come back to the negotiating table again very soon.
“We will use the application process to make sure that Iceland meets its obligations because we want that money back,” Cameron said. ”
just another nail in the EU coffin.
Cameron should cooperate with Iceland in retrieving the missing money,
the first place to look would be British tax havens.
” In a statement on last week’s European Council meeting, Cameron said “this country should be a good friend to Iceland and a strong supporter of continued EU enlargement.”
“But Iceland does owe the United Kingdom GBP2.3 billion…We will use the application process to make sure that Iceland meets its obligations because we want that money back,” Cameron said. ”
http://online.wsj.com/article/BT-CO-20100621-707710.html?mod=WSJ_latestheadlines
Fisy says: “This would then subsequently mean that UK/NL governments will get only 1/3 of their claims, instead of the full 4B Euros, resulting in direct losses of about 2.6B Euros. Needless to say, they would probably not be too happy with this outcome”
On the contrary, the ones who would not be happy with such a judgement would be the Iceland State who would then have to reimburse most of the Icesave debt from the State foreign currency coffers rather than the foreign assets of the failed bank.
Terry did write :
>http://www.ft.com/cms/s/0/d6048ce8-7a1d-11df-9871-00144feabdc0.html
>
>Again – no surprise.
What ? That the EUphile FT does miss most important aspect of whole thing?
That UK and NL governemts can threaten current people sitting in government chairs as much as they like ( our Social Democrats and spine less ” they claim anti EU “Left Greens ) ..
But this pro-EU faction does represent less than 30% of Icelandic voters from 2009, let alone know when numbers will be much much much lower for it.
Icelanders do NOT want to join the EU. And most want this application process scrapped.
Aapplication is a waste of time and money because super majority of people dont want it. Which is back to how it’s always been — in fact now opinion is more against it than before — 70%+ against; its never been this high.
EU negotators did not help they endearingness to Icelandic people by holding announcement on our national day, June 17th, either.
These days forget the FT ones with finger on pulse of UK finance are http://www.cityam.com/
>In other words: “Either you pay or you are out of EFTA”
Easy it doesnt work that way at all. What matters most from UK NL point of view is this law suit of the bond holders who finally did take they case to Reykjavík District Court recently (as is they right ) ..
Bjarni wrote :
>” If the current lawsuit by the other major claimants of Landsbanki succeeds, then they will get about 2/3 of the bankruptcy recoveries instead of nothing. Their claim is that the emergency laws from October 2008 violated their rights by giving the depositors priority of other claimants.
This would then subsequently mean that UK/NL governments will get only 1/3 of their claims, instead of the full 4B Euros, resulting in direct losses of about 2.6B Euros. Needless to say, they would probably not be too happy with this outcome. ”
It is positive to see both these in machinery of court ruling mechanism finally. In case of bond holder suit it will no doubt go quickly up to EFTA Court for ruling soon enough.
>a consumer jeweled item like a watch is regarded as a investment protection
Gold and silver retain they value better than the fiat government currencies.
And more importat as well as being plated in those metals Rolex are well made Swiss watches so they will keep they value.
I do wonder about that for other luxury items like Goldvish or Vertu mobile phones through :
http://www.vertu.com/in-en/limited-editions/#in-en_limited-editions
I have to admit, I was surprised to read that a consumer jeweled item like a watch is regarded as a investment protection against falling currency value and that Iceland is the place where visitors make a special trip to buy them.
There is no surprise that Iceland will be paying this Icesave debt, as it has already agreed to do so in law. What is not required is that the country have to agree to the repayment of the debt without having some reservations about that obligation.
It is also entirely appropriate that Iceland does not discard the right to negotiate about the disbursement of the assets from the failed banks in order to pay the Icesave debt
http://www.ft.com/cms/s/0/d6048ce8-7a1d-11df-9871-00144feabdc0.html
Again – no surprise.
http://www.icenews.is/index.php/2010/05/27/efta-iceland-must-pay-icesave/#comment-170734
Fortunately for both Iceland, and those it is indebted to – things are looking brighter – so that debts can be repaid.
http://www.icenews.is/index.php/2010/06/12/finance-minister-iceland-facing-last-hurdle-on-road-to-recovery/
http://www.icenews.is/index.php/2010/06/09/iceland-economic-recovery-slowly-gaining-momentum/
http://www.icenews.is/index.php/2010/06/13/surprise-as-luxury-good-sales-fare-well-in-icelandic-recession/
This lawsuit is about the claimants of Landsbanki – claiming a larger 66% slice of the assets.
Basically there is no bone of contention about all deposits being guaranteed here in Oct 2008 with the Law 125/2008, but only the minimum €20k of each deposit held with foreign branches of Landsbanki are being claimed by UK/NL.
The talk here last year about the certainty that law 125/2008 was applied with unlawful discrimination and that it would not survive a legal challenge, to the effect that the Iceland State would be definitely be found to be held responsible for all deposits held in foreign branches, was just the premature bleating of deranged xenophobes, licking their lips and hoping to dance on the graves of further thousands of personal bankruptcies and chronic State debt.
Bjarni did say: “Yes, UK and Netherlands will ALWAYS get the original 4B Euros back from Landsbanki bankruptcy proceedings over the next 10 years (in fact the recovery is likely to be closer to 6B Euros). So they will always get paid.”
I disagree 1 million per cent! We are Icelanders! Proud Descendants of Norwegian tax-cheats, Irish cattle-thieves, slavers and kidnappers! Will we dishonor our criminal antecedents by paying even a penny of this so-called (and I spit out the word) ‘debt’? No! Never! Remember this, fools: We prolonged the Dark Ages by an extra 1,000 years and we can always do it again. Do not tempt us.
Afram island!
Gummi
There is one big potential exception to the above mentioned ‘ALWAYS’ that has not been discussed much yet in the press.
If the current lawsuit by the other major claimants of Landsbanki succeeds, then they will get about 2/3 of the bankruptcy recoveries instead of nothing. Their claim is that the emergency laws from October 2008 violated their rights by giving the depositors priority of other claimants.
This would then subsequently mean that UK/NL governments will get only 1/3 of their claims, instead of the full 4B Euros, resulting in direct losses of about 2.6B Euros. Needless to say, they would probably not be too happy with this outcome.
If the Landsbanki Winding-up board on the other hand wins the case, then UK/NL will receive the bulk of the 6B Euros recovered.
Yes, UK and Netherlands will ALWAYS get the original 4B Euros back from Landsbanki bankruptcy proceedings over the next 10 years (in fact the recovery is likely to be closer to 6B Euros). So they will always get paid.
The debate is whether the Icelandic people should be responsible for anything on top of that, including interest and other losses by UK/NL. This was voted down overwhelmingly, 93% to 1%, last March in the national referendum.
Any new agreement negotiated (Icesave 3), even if its accepted by ALL parties involved and then passes successfully through Althingi, will almost certainly have to be put to a referendum again. Unless that succeeds, no payments can be made legally by the Icelandic government, according to the constitution.
I suppose Iceland and Icelanders want to pay – and the main question is not if pay or not – but “how will be conditions of the payment” (interests, how long and so on – and I do agree the previous “IceSave solution” was unfair to Icelandic public).
“The price” established by EFTA is something over 12.000 EUR per each Icelander (just for IceSave) – and I think the price is not so high for Iceland to let itself kick out of EFTA – but it is too high for to ask Iceland “just pay without any discussion”.
I think that nobody can say now 100% sure “how big is the fault of Iceland” in this case – and there should not be any talks about any amount until this question is surely answered. Also – nobody knows until now “how much money exactly has left” – and this cannot be answered until Eva Joly and her team will not finish their investigation. Because then the amount of 12.000 EUR might not be so high for Icelandic taxpayer.
Actually, if Icesave agreement is not reached, this effectively precludes the Icelandic government from taking on a lot of new debt. In addition to the Icesave debt itself, further Nordic/IMF loans will not be made available (we go “cold turkey”).
We have already seen in numerous countries what happens if too much debt is accumulated, so this is not necessarily such a bad thing. Granted, no loans will mean drastic cuts in services, increase in taxes, and almost certain continuation of the currency restrictions, but in the long term Iceland will be much better off, than if it takes on debt it can never pay back.
As the Iceland state has already agreed in law, to pay the deposit scheme and is in negotiations with the UK/NL about it, this EFTA letter doesn’t make much difference to the situation.
Since the time of joining, the way Iceland has developed their relationship with the EEA, has been a harbinger of an unmitigated disaster for the State economy. And still the morons want to peddle the last of the national assets for peanuts.
Liberalisation- privatisation in Iceland, has been a gigantic con job.
“The EFTA is fully aware that Iceland, the UK and the Netherlands have tried to agree a solution to the issue. If such a solution is found there will be no need for further EFTA action,”
In other words: “Either you pay or you are out of EFTA”
And here we thought we could play cool and tough with Europe.
“The current government by Johanna and Steingrimur have already lost all credibility when it comes to this particular issue, in both Iceland and Europe. So even if they managed to somehow negotiate a new IceSave 3, the chances are it would never survive the now “unavoidable” referendum. But who knows, maybe UK/NL will finally put something fair on the table that is acceptable by the majority of the people in Iceland.”
Well Iceland has lost all credibility regardless of which ever party is in power. As you say, the president can dictate whatever he wants to parliament on the Icesave issue.
I fail to see what is the point of negotiating with Iceland over the issue. It should be interesting what the new governments decide to do, I suspect they will offer new terms that are harsher than have been rejected previously. Icesave is probably going to be hanging over Iceland for decades, with Argentina being the model. Iceland does have a corrupt and incompetent government to match Argentina, so its looking probable.
Fisy
“It is good to see finally some opinion from EFTA surveilliance authority on the matter with this being the key thing : ”
I agree, why they have taken so long to pass judgement on this I don’t know fundamentally its been bad for Iceland.
“So within 2 months we are likely to see this case into the machinery of the EFTA Court.
Which is just fine — to court at last!”
My understanding is that the court will be to evict Iceland from the EFTA, not to determine the status of the law.
“So the other aspects are in no way as clear cut as this IceNews explanation of Kurt Jaeger opinion does say of course.”
Again, my reading of this is that the preliminary findings were that it was unclear – this is the final judgement and its now been clarified.
But I know how you like to redefine the definition of English words as you see fit.
We are just going to have to wait and see how this plays out over the next few months.
The current government by Johanna and Steingrimur have already lost all credibility when it comes to this particular issue, in both Iceland and Europe. So even if they managed to somehow negotiate a new IceSave 3, the chances are it would never survive the now “unavoidable” referendum. But who knows, maybe UK/NL will finally put something fair on the table that is acceptable by the majority of the people in Iceland.
If not, we are going to have to wait for a new election in Iceland, which might come sometime next year. Maybe the new “Best” party will also participate in that election, if they do well in Reykjavik on Saturday.
People are so mad at the existing political parties, that this is the first time in Iceland a “joke” party with absolutely no experience has a real chance of actually getting some people elected.
http://www.icenews.is/index.php/2010/05/18/joke-political-party-set-to-whitewash-reykjavik-election/
It is good to see finally some opinion from EFTA surveilliance authority on the matter with this being the key thing :
>The [ evaluation letter of 26 May 2010 by Kurt Jaeger of EFTA Suirvellance Authority ] criticises the Icelandic government for guaranteeing domestic depositors but not those in overseas branches of Icelandic banks – a breach of European rules
Before in the last evalution given they did not consider complaints from actual depositor :
” The preliminary findings of ESA concluded that the provisions of the Emergency Act, in particular as regards provisions giving depositors priority over other unsecured creditors and various decisions of Icelandic authorities on the basis of the Act, are compatible with the provisions of the EEA-Agreement.
ESA specifically states that its preliminary findings do not deal with compatibility issues under EEA law regarding the difference in treatment between domestic deposits and deposits held in branches of Icelandic banks in other EEA States. ”
http://www.mfa.is/speeches-and-articles/nr/5357
So the other aspects are in no way as clear cut as this IceNews exalanation of Kurt Jaeger opinion does say of course.
So within 2 months we are likely to see this case into the machinery of the EFTA Court.
Which is just fine — to court at last!
( Even though the British and Dutch governments did want to avoid that at al cost. )
http://www.icenews.is/index.php/2009/12/21/british-lawyers-say-current-icesave-deal-as-good-as-it-gets/#comment-106683
http://www.icenews.is/index.php/2010/01/11/is-a-mediator-needed-to-settle-icesave/#comment-109980
http://www.icenews.is/index.php/2010/02/04/icelandic-pm-met-with-eu-commission-president/
“Prime Minister David Cameron is open for fairness and responsibilty,at a micro and macro level.”
Telling British taxpayers to pay for the actions of the Icelandic government and bankers is the hight of unfairness.
They are not going to put tens of thousands of British people out of work so that Iceland can abstain from its legal commitments.
I read in Visir.is that politicians are already saying the new British government is going to be somehow better for Iceland and repeating the very points that the EFTA has very clearly rejected – that setting up a insurance scheme that is incapable of paying out anything and that the scale of the crash abdicates Iceland’s responsibility.
Well, the EFTA should take the next logical step and kick out Iceland. How many Icelanders work in the ETFA and will be un-employed and homeward bound. What effect will that have on the fish and aluminium industry and any further investments in non-EU country. Iceland will be screwed.
No surprise there. You never know the E.U. – eager to have a new member, may even offer Iceland a loan to pay the debt at ‘mates rates’ – 5%.
http://www.ft.com/cms/s/0/91ee3adc-458d-11df-9e46-00144feab49a.html
Prime Minister David Cameron is open for fairness and responsibilty,at a micro and macro level. And so is his coalition partner the Deputy PM Nick Clegg. This is going to be interesting.