Posted on05 January 2010.
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[...] Fitch lowers Iceland credit rating to junk [...]
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After the Icesave referendum returns a ‘no’ vote, Fitch will have to create new rating categories as there are only 26 letters in the modern English alphabet.
More black-mail from the corrupt system that created this financial crisis (not the people of Iceland).
Exactly how does Iceland’s refusal to sign up to a massive new debt affect their ability to re-pay existing debt from NORMAL government expenditures? (i.e. what Fitch’s debt rating is supposed to measure). Rationally, ACCEPTING this massive burden which would multiply Iceland’s state debt should decrease Iceland’s rating, not the other way around.
Accepting any and every blackmail just to join a ‘club’ should make anybody consider whether that club is worth joining. Unilateral Euro-ization, like Montenegro or Bosnia, would completely remove currency risks and stabilize trade. What great influence will Iceland gain by playing along with blackmail? Iceland already benefits from trade and travel agreements with the EU.
Did anyone think to ask the Fitch spokesperson what the agency planned to lower Iceland’s ratings to if the President had not vetoed? If he had opted to not support the nation’s democratic form of government?
If Fitch is worth a damn as a financial rating agency it would have planned to drop the ratings more. Iceland is standing on its August position, which Britain and Holland rejected. If it votes no, it will reject Britain and Holland’s deal. This is working toward a workable compromise.
I fear the Icelandic population has not yet fully understood what’s at stake.
Guys, it’s not about the UK/NL. The amount is really small, ~4bn$ to be paid back in 15 years. (well it’s small for UK/NL, not small for the icelanders)
The problem here is that the current global lending model is in stake.
Personally I’m with the Icelanders against the blackmail. You have to know it will not be easy for you. But I do think It worth it to try for better repayment terms.
“Exactly how does Iceland’s refusal to sign up to a massive new debt affect their ability to re-pay existing debt from NORMAL government expenditures? (i.e. what Fitch’s debt rating is supposed to measure). Rationally, ACCEPTING this massive burden which would multiply Iceland’s state debt should decrease Iceland’s rating, not the other way around.”
Iceland already has the debt, its not going away and a previous law already agrees to pay some of the money back.
The fall in credit rating is probably due to the fact that the Icelandic government – democratically elected – is no longer in control of its ability to raise further debt or agree terms for its debt repayment. That decision rests with the President and thence the people via a referendum. How credit worthy is a country that can sign agreements which can be overturned?
Not all junk is bad, you know? We just have to figure a way to get it “in tha trunk”
Rawkins of Fitch talking about the downgrade:
http://www.youtube.com/watch?v=szvcM8GUXZQ
Interesting points from that. The downgrade was not (as I had assumed) necessarily entirely due to concern over the Nordic loan status (which are tied to Icesave). Also, he didn’t stress that the IMF loan has in the past been tied to the Nordic loans, which means that there might be a little scope for movement at the next review. Although he did talk about UK/NL influence on the board there, so perhaps not.
Anyway, he gives the reason at 4:00 onwards as, “a lack of timely resolution of this issue, not conducive with what we regard as investment grade credit.” Bit fluffy, but there you go.
I assume – you do understand, Markus.
But could you explain one thing? Why do you think you can understand fully but Icelanders are incapable of understanding? ;-)
And second thought – who cares about Fitch. It was giving excellent rating just before the collapse. And in terms of REAL economy Iceland is in much better position now then a year ago (for the first time positive trade balance for more than a year!). And how would accepting over-the-top bill improve “rating”?
So I would just cut all communication with all “rating agencies” – it will save some money.
PS. people will buy Icelandic fish no matter what cause they eat food not ratings.
Looks like it will be fired shortly.
And keep in mind – it was not elected nor democratically. It’s coalition of two minority parties.
But this doesn’t surprise me – to hear explanations about democracy and elected government from the British person ;-) When did you vote for your government last time, Peter? And should Icelanders care what G. Brown is saying at all?
“And keep in mind – it was not elected nor democratically. It’s coalition of two minority parties.”
Are you saying that Iceland isn’t a democracy? it would seem so.
Moe from Rawkins clarifying the decision:
http://www.ft.com/cms/s/0/ddd14d28-fe51-11de-9340-00144feab49a.html