Representatives of the grassroots Solidarity Alliance met with IMF representatives in Iceland this week. It was the second time the group had held meetings with IMF officials. The IMF is apparently confident that Iceland can look forward to reaching the bottom of the current economic crisis before the end of 2009.
Participants discussed the onset of the Icelandic economic crisis. A statement says that the IMF and government plan has three basic goals: to revive the banks, to revive the currency and to return the state treasury to self-sufficiency.
The statement from the meeting says that tangible recovery signs will be visible in the second half of 2010 and that the financial system should be fully functioning again by the beginning of 2011. IMF representatives admit that reorganisation of the banks is taking much longer than expected. In fact, one could say the IMF and government plan has made very little progress in this area over the last eight months, mbl.is reports.
The group then asked why the IMF wants Iceland’s interest rates to remain high instead of lowering them rapidly to help homeowners and businesses. The IMF representatives responded that the rates should remain high for the sake of the Icelandic krona exchange rate to protect export revenues and prevent an imports collapse. The rate of the krona has dropped sharply over recent weeks and months.
On the subject of Argentina: Iceland should not stop co-operation with the IMF and default on foreign loans as Argentina did, because Argentina enjoyed great support from its neighbours which Iceland cannot count on in its current situation.
The statement also clearly stated that the IMF has not been discussing Icelandic matters privately with the British government and never will do – despite Gordon Brown’s vague allusion to such meetings.
The IMF representatives responded that the rates should remain high for the sake of the Icelandic krona exchange rate to protect export revenues and prevent an imports collapse.
Wow!
What about market capitalizm?
If the nation can not afford to buy salad from Holland, Land Rovers from England, plazma screens from whatever, booze from Chile – so what? It’s like keeping a dead body on blood circulation and ventilation machines. The body would look pink and “breathing” – but it won’t walk anyway.
Import will collapse? So what? It only means that we have no money for the imported sh*t. But this will happen anyway – so why keeping dead system in the house?
PS. Could anyone give a sample where and how International Moth**Fu**** helped any country?
@Alexander:
You said:
“The body would look pink and “breathing” – but it won’t walk anyway.
Import will collapse? So what? It only means that we have no money for the imported sh*t. But this will happen anyway”
Looks like you are starting to rialize the reality of the situation.
Looks like you are starting to rialize the reality of the situation.
Easy. I don’t have to “start realize the reality”. I was living in this “reality” for many years – with currency control, collapsed import… collapsed everything. So I do KNOW that IMF is not the institution to help in such situations. But they can make things worse for sure – they are experts in crisis! ;-)
“Could anyone give a sample where and how International Moth**Fu**** helped any country?”
Thats not the purpose of IMF, they burn you until everything crashes, then some investors help them selves to your country,
lets kick em out
The reality of the situation is that we can do more or less what ever we want to do,
we may get punished somehow but who cares ?
all options are bad right now
but the worst option of all is to be governed be the IMF and related crime organizations,
they will be kicked out, just a matter of time.
Geir and Arni decided that the IMF was necessary, despite being very against it earlier in 2008. So they believed that Iceland needed $5bn or more.
They even assumed liability for the Icesave and KE branches, which by late Oct they were clearly trying to avoid, in order to secure the funds.
I’m not saying that they were correct. But presumably there would be a cost to not taking the IMF loan. Reversing the three objectives gives you:
1. No ability to support the ISK. I don’t like the idea of trying to support the Krona, because it just seems to me that they’d be burning the money. But maybe I’m wong about glacier bondholders wanting to leave Iceland whatever the loss.
2. No ability to recapitalise the banks. Assuming that this has to be done to maintain a functioning economy, the government will have to borrow the money from somewhere. Would the IMF terms be better than those the government would have to offer investors? I’ve got to admit that I don’t know whether the banks really do need to be recapitalised – i.e. what happens in Iceland if they’re not?
Presumably it is important, or why else would Iceland have been trying to get money in the first place (and not just from the IMF). So, without a loan, either 100% foreign ownership of the banks (no bad thing if you can find someone willing to invest good money after bad) or their collapse, along with large segments of the economy as loans are called in.
3. No ability to consolidate state finances in the medium term. There’s going to be a budget defecit in the medium term (say 8.5% GDP for 2009)
I took that list from Oystein’s Norwegian government link:
http://www.regjeringen.no/nn/dep/fin/Dokument/Proposisjonar-og-meldingar/Stortingsproposisjonar/2008-2009/stprp-nr-47-2008-2009-.html?id=549139
Alexander E – “PS. Could anyone give a sample where and how International Moth**Fu**** helped any country?”
What help do you need – a crane to lift your rump of the chair? I stead of trying to impress the world, a better idea is probably to go to the politicans and tell them your easy solutions. Perhaps a better idea then was to have a online democratic system where people could decide if Iceland has problems or not. If they then decide that there is no problem, then there is no problem – just with a click on the mouse.
Where is the women on this “forum” – perhaps it is them that really try to get things together. They have at least left here…
There is a lot of Icelanders that have left Iceland the latest months – they try to do something.
IMF – you don´t know how this is ment to work. Take the Faraoe Islands that is part of if – do you really think that they will let Iceland down with their participation in the loan. The same will be to Norway – and I am sure several others.
The IMF loan to Iceland is build genious – but you are either not able or willing to se it. The “only thing” Icelanders needs to do, is to participate in building the future.
“Could anyone give a sample where and how International Moth**Fu**** helped any country?”
I do not know a single such example. Lots of examples though of countries with more potential resources than iceland suffering for years, after the IMF came in (Argentina) .
IMF is not interested in the general well-being of the countries it is ‘helping’, only in macro economic indicators like gdp/debt ratio and inflation. There has been considerable discussion about the track record of the IMF and its real purpose (you will find plenty of discussions on the web) .
In my opinion its main purpose is to make sure that big international creditors will get their money back.
I already gave my opinion on the IMF in a previous thread:
http://www.icenews.is/index.php/2009/01/29/fitch-warns-iceland-over-stability/
It is strange to me that some people on this forum have been extremely critical on the EU while at the same time being remarkably naive about the IMF.
Off course there is plenty to criticize about the EU but IMF is a lot worse: most countries in the EU have seen economic advance thru the common market, the IMF does not have a single positive example.
“kicking out” the imf is no option.
If IMF money is so bad, why did Iceland take it?
Simple, absolutely nobody else would lend the money.
Without foreign currency Iceland would not be able buy the ‘imported s**t’ as Alex put it, such as food, oil, medicines and everything else that modern Iceland is not self sufficient in.
The reason why most countries are basket cases after they borrow money from the IMF is that they were basket case BEFORE the IMF got involved. Just like Iceland.
exactly Niels.
The IMF should be the bank of last resort but it seems they were called in before most people had a grasp on what was going on. Long term disaster is more likely than not with the IMF as your sugar daddy. This is a dangerous experiment and scares me more than poverty.
So, I assume the answer is “I don’t know”. Thanks.
I don’t remember either. Too bad.
You don’t know such examples, Peter, do you?
Thanks all for answers :-)
@Peter – London
Peter: spot on, no one could have said it better.
@ peter…exactly.
IMF= The bad bank for countries with careless ministers of finance :)
Yes, Peter is mostly right. However, there’s a general principle that, if you have no option but to accept an agreement, then that agreement is typically not binding in future. The element of choice is fundamental to the binding nature of a contract.
“Peter: spot on, no one could have said it better.”
In fact – Peter should be the one to know… –
http://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300057287