Olafur Ragnar Grimsson, the President of Iceland, today signed off on the so called Icesave deal which parliament passed last week accepting responsibility for paying British and Dutch customers of the failed Icesave internet bank.
The President said he signed the bill because of parliament’s changes and conditions designed to lessen the impact on the nation and allow the beginning of economic recovery.
The President said that as the bill was amended and submitted jointly by four political parties and then passed by parliament after its three official readings, it is fair to say a national political consensus has been reached.
He recognised, however, the controversy still surrounding the issue, including the large public petition urging the President to send the law to a referendum; but said that a speedy solution and a concentration on the future is important in reviving Iceland’s labour market and financial system.
The final stage is for the British and Dutch authorities to accept Iceland’s terms and conditions on its repayment. There have been positive intonations from all sides, but nothing can be known until the two foreign governments formally sit down and study Iceland’s proposal.
He made the right decision in not sending it to a referendum. So, it is now finally over to the British and Dutch to decide. My money is on them saying yes, but with one or two changes to the conditions. After all, that’s negotiation.
my guess is any admendments to the conditions will have a very rough ride here in iceland so i hope the uk and dutch except it
If the British and Dutch want to make changes the deal will have to go back to the parliament,
the state guarantee is valid only with the current amendments, if you remove the amendments you remove the state guarantee,
The president serves only one purpose, to refer matters who are controversial to the people if there is a dispute between the parliament and the nation,
he has failed, making the office of president useless, no one likes Olafur, no one ever did, the only reason he was elected is that his only rival a Icelandic version of Forrest Gump,
even horses trow him off,
this is the end of this clown, shortly after the banks fell he was drunk in some embassy offering Russia use of our NATO base, saying we need new friends, if you read his speeches about the Icelandic banksters theft raids in Europe you would see why he is a certified ******* in Iceland.
Of course, he will not sabotage the Left wing cause ( a cause he has supported our worse for his whole life in politics ) and cause this government to fail that he helped to apoint in February :
http://www.icenews.is/index.php/2009/08/27/protesters-gather-in-front-of-parliament-today-against-icesave-deal/comment-page-1/#comment-91747
Maybe he can get Dorrit to pay it off! After all she has the diamonds!
Yes, your money indeed… that is if you are an Icelander who had nothing to do with this trouble caused by few, repaid by many… a shame, really.
“my guess is any admendments to the conditions will have a very rough ride here in iceland so i hope the uk and dutch except it”
Should the British and Dutch accept the amendment that the remaining loan will be cancelled in 2024 if Iceland hasn’t paid it off by then?
i did not say i agreed with all the admentments but i think any change will be in for a rough ride as the amended agreement only went through with 2 spare votes further admentments would proberbly lead to the collapse of the goverment so it would be back to square 1
“Should the British and Dutch accept the amendment that the remaining loan will be cancelled in 2024 if Iceland hasn’t paid it off by then?”
Yes, I think we should.
It’s time to draw a line under this poisonous dispute. The Icelandic government and Alþing have accepted responsibility for some or all of the guarantee (depending on how they are actually able to pay by 2024), they have been hit with a swingeing interest charge on it, and even if the Landsbanki assets cover 75% of the guarantee as suggested by the Icelandic Ministry of Finance the remainder is still a lot of money for 320,000 people to find.
I think we should be satisfied with their amended agreement, provided that the text agreed by all parties doesn’t give Iceland room to wriggle out of paying anything when their economy starts to grow again.
oops, a clause should read:-
“depending on how much they are actually able to pay by 2024″
Sorry
Let’s face it reason that Ólafur Ragnar is president is because of his wives.
First the lovely Guðrún Katrín and now spunky little elf Dorrit, how actually has some reasonable ideas :
http://www.timesonline.co.uk/tol/news/world/europe/article5626672.ece and doesnt take any nonsense from her husband clearly juding by that Conde Naste interview:
http://www.portfolio.com/news-markets/international-news/portfolio/2009/02/09/Icelands-President-and-First-Lady
If he had not vetoed Davið’s media law maybe things would have worked out different than they have since June 2 2004 when he did so.
>>“Should the British and Dutch accept the amendment that the remaining loan will be
>>cancelled in 2024 if Iceland hasn’t paid it off by then?”
>
>Yes, I think we should.
>
>It’s time to draw a line under this poisonous dispute.
After Iceland’s government agreed to pay it back, their parliament’s counteroffer was to not pay back anything outstanding after 2024. That means there is no obligation to repay the full amount. If that is accepted by UK and Netherlands, then I take my hat off to Iceland as the best negotiators in the world! I can see no reason why a sovereign debt should be written off after 15 years.
“depending on how much they are actually able to pay by 2024?
The total amount of what we are being told we owe for all 3 banks and the state exceeds 6000 bn kr
thats IceSave x8 when all assets of banks have been sold to cover debt
When the IMF made a loan deal with the Icelandic state they said the debts could not go over 240% of GDP, according to latest numbers we are now at 233%
i wonder if the iceasave deal had remained confidential as it was supposed to be and the gov would have managed to squeeze it trough parliament somehow if the IMF would have decided not to lend Iceland because of the estimated amount of possible debt would have risen to a level to grate for Iceland to survive,
In my mind we can not pay any of the debts from the private banks, somehow i thought when the banks were privatized and sold we would not be responsible for them, but unfortunately we live in a world where the rules say that profit is private an losses are public, a fine system that creates income and generates slaves for the rich, and they laugh all the way to the bank while we argue.
Australian 60 minutes on Iceland
http://sixtyminutes.ninemsn.com.au/article.aspx?id=855189
>The Icelandic government and Alþing have accepted responsibility for some or all of the guarantee
Not so. They’ve included a clause saying that they’ll be taking it to court and revoking the state guarantee if the court finds in their favour.
As that’ll happen before the first payment is made, it is effectively no different than the current situation. The only differences, if the UK/NL accept this agreement, are:
1. Iceland gets access to the IMF/Nordic funds.
2. If the court finds in favour of the UK/NL, then the limit on the state guarantee will apply.
Whereas, if the UK/NL reject the amendments, the opposite will likely apply.
So there’s no carrot for the lenders in this agreement. It’s just a continuation of the attempts during the negotiation stage to avoid a state guarantee.
Mike Smith wrote :
>Yes, I think we should.
>It’s time to draw a line under this poisonous dispute.
Appreciate this magnamiousness.
Personally I am not comfortable with that rite off after 2024. But perhaps it is indeed done for a reason as Axel says about the IMF loan ceilings. But still I would prefer personaly that we paid off the full debt as long as it would take, subject to the caps based on GDP.
But this only will close the IceSave issue.
The issue of the taking of Kauthping Singer and Friedlander causing collapse of Kaupthing is still very much next on agenda. And in much worse bad faith in it having been done than even the putting of Landsbanki and Central Bank, Govermnet of Iceland on the Terrorist list.
Axel wrote:
>but unfortunately we live in a world where the rules say that profit is >private an losses are public, a fine system that creates income and >generates slaves for the rich, and they laugh all the way to the bank while >we argue.
This ” profit is private an losses are public ” mantra from left wingers is mind less slogan. It is mind less slogan because of course as Mike UK Nordic analyst point out before profit is taxed by the state. So the profits are public as well as private.
The losses * should * not be public. But thanks to EU regulations they have become for us in IceSave case.
Lets be specific, the ” fine system ” you are talking about came from the EU regulations. That is why Icelandic taxpayer is left with this bag for IceSave ( Landabanki ).
A bag we taxpayers do not have to take for Glitnir ( in worse shape ) and Kaupthing ( in good shape but taken by UK Darling and the FSA anyway).
To Bromley86:
>>>>Not so. They’ve included a clause saying that they’ll be taking it to court and revoking the state guarantee if the court finds in their favour.
Iceland alone cannot take this the IceSave matter to court, although it would very much like to. As with all disputes between sovereign countries, both countries must accept before taking it to court. If this ever does go to court, then both countries would of course have to adhere to the results.
>>>>2. If the court finds in favour of the UK/NL, then the limit on the state guarantee will apply.
The limits on the guarantee are mainly designed to:
a) protect the existing sovereign rights of Iceland.
b) make sure that any payment regarding the guarantee amount would be within some reasonable limit of what Iceland can actually pay. Please note that most of the international press got the actual details of this limit quite wrong. Each year the guarantee is limited to 6% of the GROWTH of GDP compared to the year 2008, measured in Pounds and Euros.
c) make sure that any payments from the bankruptcy proceedings of Landsbanki, would be made in accordance with the existing Icelandic laws.
d) put some finality into the guarantee (2024) so it would not land on future generations. Very important point for most people here.
>>>>Whereas, if the UK/NL reject the amendments, the opposite will likely apply. So there’s no carrot for the lenders in this agreement. It’s just a continuation of the attempts during the negotiation stage to avoid a state guarantee.
The carrot for the lenders is that they get to keep most of the terms of the original agreement, which were very generous, and would almost certainly not be offered again by Iceland if the agreements were to be renegotiated.
If the agreements are rejected, this would be perfectly fine with most of the population. According to recent polls, large majority of Icelanders were against the loan agreement as it was negotiated, even with the amendments.
Hopefully, everyone now also understands that any agreement involving any guarantees by Iceland will have to be passed by Althingi in order to take effect. No more outsmarting and outmaneuvering of the Icelandic negotation committee, during secret negotiations.
Perhaps some interesting current development. Dutch minister of finance Wouter Bos is of the opinion that Iceland should pay the full debt. According to him the Netherlands should only make some concessions towards Iceland if the IMF (and NOT Althing or any icelandic institution) decides that the debt for Iceland would become too heavy a burden.
On a yearly base the IMF should make such an analysis and only if this would show that the situation would become unbearable for Iceland some of the amandments proposed by the Althing could be considered.
Bos is still in talks with the UK in order to draw one line towards Iceland.
http://www.z24.nl/bedrijven/finance/artikel_91333.z24/Bos__IMF_toetst_of_schuld_IJsland_te_zwaar_wordt.html
Another related article from the same site: according to icelandic economist Matthiasson Iceland is probably capable of repaying the entire loan to the UK and NL because the sale of Landsbanki assets would cover much of it.
http://www.z24.nl/economie/artikel_90484.z24
To Niels,
>>>>Another related article from the same site: according to icelandic economist Matthiasson Iceland is probably capable of repaying the entire loan to the UK and NL because the sale of Landsbanki assets would cover much of it.
Þórólfur Matthíasson is one of the clever economists in Iceland, so I will certainly not try to dispute any of his findings. Without reading the article (my Dutch is rather poor :-)), the key issue is what assumptions he makes about the growth of the Icelandic economy, exports, and exchange rates, during the next 15 years.
For example, Gylfi Magnusson, our Business Affairs Minister, has been stating repeatedly, that Iceland will have no problems paying for IceSave so long as the economy grows only 4% year for the next 15 years, which should be “easy”, since we grew 8% year for the last 15. Well, no one knows really what will happen, but in my view there is a good chance the Icelandic economy will not be growing very much in the next few years, at least when measured in foreign currency.
Assuming 70-80% recovery rate by Landsbanki for TIF, the total payments by the Icelandic goverment will amount to approx 1B Euros plus approx 1B in interest payments. This gives total of 2B Euros plus further interest. But please note, that how fast the recovery will be and the resolving of legal issue regarding priority, can possibly have major impact on this estimation. Assuming this is still correct, we get on average 300M Euros per year in payments (higher first, lower later, due to interest), which is approx 10-20% of exports, a very high number.
If the economy in Iceland recovers, these payments will difficult but possibly we will be able to manage. If on the other hand, the Icelandic economy does not recover, then these payments will be impossible, and if it all goes south, sovereign default will follow. This is the main reason the amendments to the IceSave agreements were passed.
Hi Bjarni,
The numbers mentioned by Matthíasson in the article are as follows. With regard to the dutch debt of 1,3 billion the Landsbanki assets would cover 75 %. This would leave a debt of 325million euro by 2016 or in the worst case , 900 million euro, if Iceland would wait for 7 years and not pay any interest. Apparently this is an amount of money that Iceland can cope with. (this is what the article says)
A growth of “only 4 %” seems very much with regard to the current situation, however the Icelandic economy has contracted considerably so some improvement could really mean that 4 % is possible.
Matthíasson goes on to mention something that I find difficult to believe: he thinks the krona to be undervalued and expects it to gain at least 20 %if the economic situation gets better. This is something I am doubtful about.
Thanks Bjarni. The amendments were worse for the lenders than I thought (although it would have been obvious if I’d thought about the figures :) ).
I may be wrong, but the legal amendments seem to indicate that it’s not just a case of Iceland maybe taking the UK/NL to court. They look to cover any EFTA/EU process that might made a definitive statement on state guarantees. So the point, i.e. that the UK/NL might as well just wait until the EFTA/EU rule on the matter, may still stand.
When you say that the original ageements are very favourable for the lenders, are we just talking interest rate? (As you say, that incomprehensible condition that the TIF nothave priority in the original guarantee has been addressed and I can’t of hand think of anything else that was especially pro-lender.)
“When you say that the original ageements are very favourable for the lenders, are we just talking interest rate?”
Perhaps the fixed repayment term – even though it was standard as any extension required from genuine inability to pay can always be negotiated in future years…
To Bromley86:
>>>>When you say that the original ageements are very favourable for the lenders, are we just talking interest rate? (As you say, that incomprehensible condition that the TIF nothave priority in the original guarantee has been addressed and I can’t of hand think of anything else that was especially pro-lender.)
When the agreements were finally published and analysed by people in Iceland not involved with the government, there were number of issues unearthed that were considered very unfavorable to Iceland:
a) The first point you already mentioned, that TIF does not have priority of the first 21K Euros over FSCS and DNB which paid amounts over 21K Euros, even if they are supposed to according to Icelandic bankruptcy laws.
b) Full risk born by Iceland if recovery from Landsbanki will be less than anticipated, takes longer time, or if other Landsbanki claimants are successful in overturning the emergency laws (which gave priority to deposit claims over other claims)
c) Payment of interest (5.55%) by Iceland even though interest payments are not recoverable from the bankruptcy proceedings. The total interest payments by Iceland will probably end up being higher than the 21K guarantee payments themselves.
d) Lack of any reference to the original acceptance conditions by Iceland, where special consideration was supposed to be given to Iceland’s unique situation due to the collapse of the banking system
e) Lack of any reference that the bankruptcy proceedings should be judged according Icelandic laws.
g) Very weak clause for opening up renegotiations, if the Icelandic economy does not recover
g) Full waiving of any legal rights by Iceland regarding the deposit guarantee and any rights to defence if the matter ever goes to court
h) Full waiving of all sovereign rights, Iceland automatically has as a country
i) Large number of possible termination events, which could allow for full immediate recall of the loans. Some of these termination events, had nothing to do with the original guarantee or the banks. For example, if the energy company, Landsvirkjun (owned by the government) got into financial difficulties (which is likely), this could potentially trigger recall of all the loans.
The purpose of the amendments to the Icelandic government guarantee was to fix at least some of these problems, so Althingi would be able to pass the laws, accepting the guarantee.
>Personally I am not comfortable with that rite off after 2024. But perhaps it is indeed done for a reason as Axel says about the IMF loan ceilings. But still I would prefer personaly that we paid off the full debt as long as it would take, subject to the caps based on GDP.
Magnanimous of you too Fisy!
You say that Icelanders pay their debts. I think that is all anyone would expect.
Negotiation of interest rates – ability to defer, etc, I have no problem with. However, I am unhappy with the ‘get out of jail by 2024’ clause.