Johanna Sigurdardottir, Prime Minister of Iceland, said in Iceland’s Althingi parliament yesterday that the country’s economy has not been adversely affected by the delay in payment of the second part of the IMF loan, as the first instalment has not been spent. The current goal remains to get the delayed second portion of the loan paid to Iceland in July.
“Some people have been saying that this is having an effect on the exchange rate of the krona – but it actually makes no difference when the loan is paid out because the country’s current finances are perfectly adequate to back the krona as long as the current exchange restrictions are in place,” Sigurdardottir said.
She went on to explain that if Iceland had received the due second payment already it would be costing the country money in interest. As it is, the money from the first payment from the IMF and other Nordic nations is still sitting unused in a bank account.
Sigurdardottir’s comments came in response to a question by Einar K. Gudfinnsson, and Independence Party MP. His question concerned the delay to the second payment, mbl.is reports. He said it was a question of trust in the nation and the IMF’s delay tactics could well have a strong effect on the Central Bank’s upcoming policy rate decisions. Gudfinnsson said the government’s answers so far have been very unclear.
The Prime Minister responded that there have been several reasons for the delay in talks with the IMF. Among them is the need to make progress in finalising the recapitalisation of the banks before the loan will be paid – which can hopefully be at the beginning of July.
Hence why Icelandair is now majority owned by government controlled financial institutions. International creditors are seeking “hard assets” as collateral for the recapitalisation of Icelandic institutions. It’s with interest to reflect on the domestic spin, about Icelandair as being under control of “domestic players,” this is for local consumption – however does not reflect the reality.
The Social Democratic – Left/Green government, faces the same unwelcome reality any political party faces under IMF administration. This is explains why financial settlement agreements with IceSave are moving forward now, this government is under pressure from IMF European members to take care of this state of business before the second tranche of funds.
The sooner this is done, the quicker the talks will wrap-up.
What the government cannot say outright, is that a large swathe of these ” hard assets” will not be under Icelandic management for some time to come. Such an outright statement would be political fodder for the opposition and disrupt the political balance between the Left/Greens, but surely the Left/Greens know the options to turn around the domestic economy are very dependent on the financial settlement agreements being obtain, even if the outcome runs counter to parts of their political mandate.
Prime Minister Johanna Sigurdardottir is political astute to mention the current exchange restrictions staying in place. Taking them off would be very traumatic for the state and the person the street. That said, the government may find in the end, it is more useful from a domestic prospective to do so, should the current talks run aground. The shock will be very painful, but short lived over the course of the next four years. Therefore, urge the government to consider the possibility of doing so, as such a maneuver will pay off faster than the current approach should domestic opposition to EU admission unfortunately continue to grow. At the least, the threat of doing so, will give Iceland much needed political collateral in talks with the IMF and it’s partners as term requirements are consider with its international partners.
Speaking of exchange rates, I note that the new Yahoo currency converter had the Króna at 357 to the £ compared with the Seðlabanki joke rate of 202 to the £.
So when the Icelandic Government is forced to stop propping up the Króna it is going to be a very big shock indeed for the Icelandic people.
I can understand the Government wanting to rig the exchange rate in this way at present. Judging by the property pages of the Morgunblaðið website, there are some very nice properties in Iceland that would be ridiculously cheap by British standards, for example, if we could get our hands on them at an exchange rate of 357 Krónur to the £. I would certainly like to in a few years time, as I want to retire to Iceland!
>I would certainly like to in a few years time, as I want to retire to Iceland!
I seem to remember seeing that non-resident foreign nationals can’t purchase property in Iceland. Not that that will prevent you buying once you become resident, but don’t think you can become a BTL property tycoon as you’re limited to a primary residence. :).
BTW, does anyone know what the IMF funds are meant to be used for? Because last I saw, admittedly a few months back, the government was claiming that none of the first tranche had been used. The UK and Dutch have loaned the money to cover the EEA guarantees. When the currency restrictions are lifted, buying ISK to support it will just be burning money, so it can’t be for that surely.
Is it to enable Iceland to repay government bonds as they fall due and can’t be rolled over (after the currency controls are lifted)?
“Speaking of exchange rates, I note that the new Yahoo currency converter had the Króna at 357 to the £ compared with the Seðlabanki joke rate of 202 to the £.”
Króna at 357 – today 360 – to the £ is ‘BID’.
‘ASK’ is 417 against £ ( 363 to the Euro ).
An untenable situation for the icelandic people.
> Bromley – “BTW, does anyone know what the IMF funds are meant to be used for?” –
I don´t if you understand Norwegian – here is what is posted by the Norwegian government – which the reflects the other Nordic countries part of the loans:
http://www.regjeringen.no/nn/dep/fin/Dokument/Proposisjonar-og-meldingar/Stortingsproposisjonar/2008-2009/stprp-nr-47-2008-2009-.html?id=549139
Thanks Oystein, I’ll use Google to plow through it.
Anyone else doing likewise might like to know that translating that contents page means the rest of the document translates when you follow the contents links. Very cool :) .
IN ACCORDANCE WITH THE FREE MOVEMENT OF WORKERS ALL EU CITIZENS ARE GRANTED RESIDENCE IN ICELAND. THERE ARE NO LIMITS TO THE BUYING OF PROPERTY BUT THE LIMITS THAT ARE IMPOSED TO THE NATIONALS. ALSO RESTRICTIONS OR DISCRIMINATION GROUNDED ON NATIONAL ORIGIN IS FORBIDDEN WITHIN THE BORDERS OF THE EEC.
SO AS A BRITISH YOU CAN BUY AS MUCH AS ANY ICELANDER. ACTUALLY ICELANDIC BANKS AND REAL STATE AGENCIES ARE HOPING FOR FOREIGNERS TO INVEST IN HOUSING IN ICELAND.
IT IS TRUE, YEARS AGO IT WAS BULGARIA OR RUMANIA, YOU COULD GET VERY CHEAP HOUSES AND APARTMENTS THERE, NOW IS THE TURN OF ICELAND. THERE IS PLENTY OF EMPTY UMPAID HOUSES, SUMMER HOUSES ETC… THAT THE BANKS WOULD REALLY LIKE TO GET RID OFF.
CLEAR?
GUS. When it comes to buying properties, it is very important to read what is written in small letters – never thrust what is written in big letters/uppercases/capitals. The Vikings – that you love and admire so much – has at least made a very good homepage for those of their citizens who wants move around http://www.hallonorden.org.
Ooops – It seems that the URL shows wrong because og the punctum .
http://www.hallonorden.org/
I DON´T LOVE AND ADMIRE THE VIKINGS. I DON´T ADMIRE OR WORSHIP THE ICELANDERS ( THEY ARE NOT “PURE VIKINGS” BUT A MIX OF MANY EUROPEAN NATIONS, AND NOW POLISH, ALL KIND OF ASIAN, ETC…).
MAYBE IN NORWAY YOU ARE DOING A BETTER WORK IN TRYING NOT TO MIX WITH “IMPURE” RACIAL GROUPS AND KEEP YOUR VIKING HERITAGE INTACT. BUT NOT HERE IN ICELAND. ICELAND IS VERY MULTICULTURAL AND MIXED. YOU CAN FIND HERE THOUSANDS OF “REAL ICELANDERS” WITH BROWN SKIN AND BLACK HAIR…
AND, WHAT IS THE POINT OF YOUR RESPONSE??
THERE ARE CERTAIN LAWS THAT ALLOW EU CITIZENS TO BUY LAND IN ICELAND, AND EVEN IN NORWAY, JUST IN THE SAME CONDITIONS THAT THE NATURALS OF THOSE COUNTRIES.
DO YOU LIKE IT LIKE THIS OR NEED SOME MAYONAISE?
Convert
Type a country or currency and use the Cursor Down Key to get Suggestions based on what you typed
Please enter an amount of EUR
€
Type a country or currency and use the Cursor Down Key to get Suggestions based on what you typed
Please enter an amount of ISK
kr
Using an exchange rate of 1 EUR = 312.5868 ISK for
View 5 Day Trend
Please note: The exchange rates given are ‘bank rates’, high street rates may be subject to commission
INTERNATIONAL MISERY FUND