Oddsson in war of words with Bank of England chief

According to former Central Bank of Iceland governor, David Oddsson, his British counterpart, Mervyn King, faithfully promised that Iceland would not have to pay anything for Icesave in the event of Landsbanki’s demise. The governor of the Bank of England denies the claim.

At a time when the Althingi parliament is examining a new bill that would see Iceland refund lost Icesave money to the British and Dutch governments, the timing of this latest spat is very sensitive, according to The Guardian.

As previously reported on IceNews, a new Icesave agreement was agreed upon in December and must now be voted on by the Icelandic parliament. If Althingi passes the bill, there is still the potential for President Olafur Ragnar Grimsson to send it to a public referendum. Grimsson is the only Icelandic president to have ever used his/her power to send new laws to a public vote — something he has now done twice; including for the last Icesave agreement. The public voted no by over 93 percent last March.

As reported by Vidskiptabladid, David Oddsson has come out claiming that shortly before the banking crisis of autumn 2008, Mervyn King gave him personal assurances that the Icelandic government and taxpayers would not be called upon by Britain to honour depositor guarantees.

Furthermore, he claims to have the whole conversation on tape: “Usually we did not record conversations such as this one, but for some reason it was done in this case,” Oddsson told Vidskiptabladid.

Icesave held UK funds of nearly GBP 5 billion at the time of its collapse and both central bank bosses had been involved in trying to broker a solution that would have avoided the widespread destabilising effect of an outright collapse. “I was very heartened to hear this and thanked him,” Oddsson said of King’s alleged assurances.

Meanwhile in London, King is said to be livid at Oddsson’s claim and a Bank of England spokesman told The Guardian: “The accusation is completely untrue. The governor told David Oddsson he had to act in the interests of Iceland. The governor had been urging the central bank of Iceland for many months to reduce the size of its banking system. He wrote to Mr Oddson on 23 April 2008 making this point clearly.”

David Oddsson says he wants the Central Bank of Iceland (which he no longer works for) to make the recording public, but that it cannot do so without Bank of England approval.

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