Johanna Sigurdardottir, Iceland’s Prime Minister said at a press conference yesterday that it has barely occurred to her that parliament might vote against accepting the deal on Icesave repayment agreed with the Netherlands and the UK. Opposition MPs said meanwhile, that the declassification of confidential documents has done nothing to change their opinion.
Yesterday’s press conference was held by the Prime Minister along with Finance Minister Steingrimur J. Sigfusson and Gylfi Magnusson, the Minister for Business Affairs. The ministers used the opportunity to reveal that 68 confidential documents were being made public and a further 24 were being made available only to MPs, Frettabladid reports.
Sigurdardottir said that Iceland has only one chance to clear up the Icesave issue finally. Sigfusson added that he would be extremely worried in the event the deal was voted down in parliament. “It is not at all certain that people would be willing to start again at the beginning,” he said.
The business minister said that it is “absurd” to assume that the nation could simply refuse to live up to its responsibility with regard to Icesave.
The leader of the Independence Party, Bjarni Benediktsson said that the bill is an attempt by the government to rationalise the unsatisfactory contract result from intergovernmental negotiations, as well as being an attempt to shirk responsibility. He said the loan agreement reads more like a typical loan and not one made between nations.
Birgitta Jonsdottir from the Citizens’ Movement said that her opposition to the bill has only hardened and that the best option would be to renegotiate the loan agreement with the Netherlands and the UK.
“It is just unacceptable and very dangerous for the state to take on this sort of debt responsibility,” said Sigmundur David Gunnlaugsson, head of the Progressive Party.
The bill was presented to the parliamentary groups of the two coalition parties over the weekend where a few changes were made before it went to Cabinet on Monday. The bill will be discussed in open parliament tomorrow.
The Prime Minister said she believes no ‘Plan B’ is necessary because the bill will surely not fail in parliament.
[…] IceNews: Iceland Icesave deal: “there is no Plan B” (1.7.09) […]
Peter – London, just to be clear, those two article are a reaction to the sizeable interview with Davið in MBL on Sunday which a lot of the Green-Red supporter want to ignore.
I will not post in detail of that interview for now as I hope that the IceNews contributer can be bothered to cover it as article in itself.
But will say that, in public Davið has always been consistent.
Bear in mind that assurances of rollover of loans where given by wholesale lender to Glitnir and Landsbanki and Kaupthing where there during the later half of 2008.
It was only after Lehman fell that these rollovers where refused.
So there is no reason for Davið to say anything negative about any specific bank.
In the Central Bank reports and also for example in this interview from March 2007 he keeps on making the same points — that the banks are too large and should cut down they dare devil expansion abroad.
http://icelandreview.com/features/politics_and_business/?ew_news_onlyarea=&ew_news_onlyposition=11&cat_id=21123&ew_11_a_id=267595
DO: “.. Nobody can forecast the economic situation for a long, long time. You can try, but you are not likely to be right. We at the [Central] bank tell people in commerce that they should slow down a bit. Rapid expansion can be shaky for everybody.
KM: Why? What could happen?
DO: The Icelandic banks are funding themselves from loans from abroad, mostly. While the money is enormous like it is today in every market there is no problem that anyone can see.
But this can change. The easy access to money may not be as easy as it has been for a long time. And that could be a problem. Even if the credit ratings of the bank and state are good, you should try to play it a little bit softer.
But these are fine young men. They should know the wind is not always at your back. You should beware of that. This is the Central Bank’s role to play. Everyone else is playing another game, and we are sitting here in the bank saying, ‘Hey guys, slow down a bit.’
Dave Doctor:
>What if there was a class-action suit against the number one fishery in
>Iceland, but instead of asking for damages from the fishery, the plaintiffs
>sought damages from all citizens of Iceland? The judge would throw the case
>out. And that is what should be done with the proposed loan.
If there was a stupid EU directive making the fishery insured by the Icelandic state, and if that EU directive was taken into Icelandic law, then yes, the Icelandic citizens would be liable.
That is the reality of Iceland signed up to the EEA agreement. When it takes an EU directive into its own law, it is bound to those terms in general.
( A lawsuit in Iceland can then get the directive or its codification as the Icelandic law to be interpreted by EFTA Court.)
However there are conflicting clauses in EU Directive 94/19/EC regarding the recent case of Iceland ( i.e. that the EU burecrat authors of the directive either decided to ignore or didn’t foresee the potential for situation to arise where the payment of the minimum deposit guarantee would simply outstrip the member state banks or even country’s ability to pay — but they still state that “..this [financing capacity of such schemes must be in proportion to their liabilities] MUST NOT, however, jeopardize the stability of the banking system of the Member State concerned”):
https://www.icenews.is/index.php/2009/06/16/where-have-all-the-billionaires-gone/#comment-82056
Also Bjarni points out regarding the liability (– but I do not think any one really dipsutes that we are going to pay our debts just how much interest and over how many years. Crucial though is to get a cap per year based on our exports which gives us the foreign currency we have to pay for this debt):
>After the crash in October, this point has been heavily researched by
>various legal scholars in Iceland. According to their published opinions,
>the ONLY way the Icelandic government can authorize ANY guarantee, is
>by passing a specific law for it in the parliament. Unfortunately I have only
>seen those legal opinions in Icelandic, so I am unable to provide
>references to them in English. Therefore based on these legal opinions, if
>and only if the Icelandic parliament now passes the UK/Netherland
>agreements, will the IceSave guarantee be legally authorized and
>enforcible in Iceland.
In case there is any doubt that the banks and government are one and the same, David Oddsson in February 2008 fully backed the Icesave approach to raising funds.
http://newsfrettir.com/banks/general/1037-praised-landsbanki-and-icesave-six-months-before-the-collapse
http://visir.is/article/20090705/FRETTIR01/809114049
Hi Peter – Yes, the people who are citizens of the Iceland nation state, created just a short time ago, in the mid-1900s, should declare themselves independent of any government that believes they have to pay for a private business failure. There’s nothing surreal about revolution when faced with multi-generational servitude to pay off a loan.
It’s quite a stretch to refer to my comments as “fantastical rubbish.” In the other post, I was indirectly referencing US case law, and possibly UK case law, that has deemed a deposit to a bank to be a loan. This really is besides the main point which is that Icesave was a private business and any losses should be settled between the business and the business’s customers.
Let me propose an analogy to make my case. What if there was a class-action suit against the number one fishery in Iceland, but instead of asking for damages from the fishery, the plaintiffs sought damages from all citizens of Iceland? The judge would throw the case out. And that is what should be done with the proposed loan. Toss it.
*Here by the way is a representative post by Peter – London and my attempt to give him constructive reply to he terrible generalization and ad hominem about “Icelanders ” and of course his poor grasp about issues related to banking:
https://www.icenews.is/index.php/2009/06/16/where-have-all-the-billionaires-gone/#comment-82877
( If you reader get bored by my posting just ignore it — and read Bjarni instead. His posts are *well* worth reading. )
Bjarni wrote:
>Probably the best analysis on the subject is the report by Kaarlo Jännäri (25),
>which is a retired Director General of teh Finnish Financial Supervision
>Authority. Chapter 3. provides detailed account of what happened before,
>during and after the crash.
You can find it here in summary form with link to full report ( do read full report that is very meaty where summary is not ):
http://eng.forsaetisraduneyti.is/news-and-articles/nr/3581
As Bjarni point out:
>Turns out, Landsbanki was in almost every material way, adhering to all
>the banking regulations, both Icelandic and EU, and therefore couldn’t be
>easily stopped or shut down. Various respective governments (including
>the Icelandic) were very worried about how quickly the IceSave accounts
>were growing, but couldn’t do anything legally to stop it.
Dave Doctor, I am afraid that while I would myself love it to be that all the world has sound money backed by silver and gold it is not the way of the time since the French Revolution. Warfare welfare state love fiat currency.
Closest in current era is currency backed by oil and gas receipts in some ways although not of course restriction on government printing money that gold and silver backing gives — like Norway now and other country — and in three year or so time Iceland mostly likely because of Dreki area.
>Plan B is saying, “I am sorry many people lost money in the fraudulent banks, but only those people who ran those banks should be held responsible for the losses.”
Unfortauately as well as benefits of being part of EEA our representatives did adopt this flawed EU directives for finance in whole including Directive 94/19/EC .
This depositor insurance liability does exist — and Iceland government signed us up to it as part of EEA. So we cannot walk away from it.
But we sure as hell should be getting impartial third party to rule on terms of repayment of this loans — not some EU kangeroo court ” binding arbitration ” but some other that is acceptable to both EFTA Court and EU Commission ( or at least to Iceland, and EU memerstate UK and Holland which would be preferred ).
I write here on why deposit insurance schemes cause moral hazard at best and at worst cause things encourage things like IceSave to get so big when without it there would have been no big deposits from UK for example in IceSave :
https://www.icenews.is/index.php/2009/06/08/politicians’-pride-angers-man-on-street/#comment-80606
https://www.icenews.is/index.php/2009/06/22/haarde-in-dublin-ireland-worse-than-iceland/#comment-82596
But that depositor guarantee scheme exist and Icelander taxpayer has liaiblity to pay for IceSave that is not in doubt. 83% asset recovery against debts is projection from Landsbanki assets.
Even with that though it is 5.5% interest payments for first 7 years ( uncapped against GDP and exports ) that will kill the country ability to function and for us to pay our debts.
That is not in doubt by any serious analyst.
>Bromley86 – the point I made re flying saucers – perceptions are not facts.
>
>https://www.icenews.is/index.php/2009/06/26/rejecting-icesave-deal-could-be-akin-to-declaring-war/#comment-83635
“Like flying saucers and ghosts – perhaps it more demonstrates that some people will be inclined towards what they wish to believe, rather than what is reality.”
Well there you show certainly Peter – London approach to posting here.
He believe that Brown and Darling can do no wrong and that all Icelander are thieves.
This is not ad hominem it is an observation of his tone when he post, what he post and intent of what he posts.
Of course I could be silly and post ” Go UK! ” in response to his posts and that of others, to retort to childish ” Áfram Island! ” that some poster here use but I am not a child and try keep conversation level up a notch through my post .
Naturally I am suspicious of intentions of those that do try to bring it down to childish name callings like Peter – London.
Terry, at least you and I clearly share same sense of humor in TV show we enjoy.
Terry thank you for reminding me of wonderful show Citizen Smith, featuring Wolfie Smith character who is predecesor of our own leftie loser Georg Bjarnfredarson from Naeturvaktin ( “Night Shift “):
http://icelandreview.com/icelandreview/search/news/Default.asp?ew_0_a_id=310103
( BTW Naeturvaktin a great show worth buying on DVD. But make sure you get the second run of DVDs becase first run did not have English subtitle. Dagvaktin “Day Shift” is sequal and all it DVD releases has the English subtitles. )
Could hardly call me Left wing though so really it is not a very apt thing.
I enjoy Gummi’s satire posts, even if they naturally misreperesent my positions — as is they purpose to disrupt the flow of meaningful conversation .
Doctor Dave
Mike explains quite eloquently exactly why you are talking fantastical rubbish –
https://www.icenews.is/index.php/2009/06/26/rejecting-icesave-deal-could-be-akin-to-declaring-war/comment-page-2/#comment-84340
You are right about one thing, you don’t have to pay your governments debts if you leave Iceland and stop paying tax there.
(This is getting positively surreal, are we going to see Icelanders declaring themselves independent of Iceland? They could get a new language – French is nice – and a new currency – the F.U.)
[…] und Bürgerbewegung äußerten sich gegen die Vereinbarung. Siehe den ganzen Bericht bei IceNews (in […]
Loves this quote: “The business minister said that it is “absurd” to assume that the nation could simply refuse to live up to its responsibility with regard to Icesave.”
A “nation” does not have a responsibility. A “nation” is not one person. The nation of Iceland refers to hundreds of thousands of people who do not have a responsibility to cover the losses of Icesave depositors or the losses of people who lost money in the stock market or the losses of anyone else. Each individual person in Iceland is only responsible for his or her own losses in their own lives.
An Icesave depositor does not have the right to bang on the door of an Icelandic home and that family accept a loan from the Netherlands and the UK to cover the losses of the Icesave depositor. For the same reason, the politicians of Iceland do not have the right to mortgage the lives of all Icelandic people to cover the losses of all Icesave depositors.
Don’t believe the hype that there can’t be a plan B. Plan B is find a politician who truly is looking out for the people of Iceland instead of the current one who is mortgaging the people of Iceland in perpetuity.
Plan B is saying, “I am sorry many people lost money in the fraudulent banks, but only those people who ran those banks should be held responsible for the losses.”
Plan B is staying out the EU and avoiding another paper currency like the Euro which can lose its value just as fast as the krona.
There are plenty of people who want to buy fish and aluminum, which I think are the top exports of Iceland. If the UK and the EU won’t take your products, ship the products to the US, Asia and South America.
As often happens, I’m not sure what your point is Alexander :) .
I’ll freely admit that I don’t know how binding a Memorandum of Understanding is, but it is a document signed by the Icelandic government. My (uneducated) reading of it leads me to believe that it is binding and that the terms may only be changed if both parties agree, which kinda looks like an agreement to me.
I imagine that if the Dutch side started high, the Icelandic side started low. 6.7% is where they ended up, but who “won” I couldn’t say.
I’d frankly be amazed if it was part of a nefarious Dutch scheme to ensure that they got the 5.5% that they always wanted. I suspect that the Dutch thought it would end with the MoU, which might explain why they were so vocal in blocking the IMF loan if they thought Iceland was having second thoughts about this agreement.
“Looks like the negotiators did okay, as they’ve reduced the Dutch interest rate from the 6.7% that was agreed to back in 2008”
Bromley, have you ever visited bazar aka open market? In the Middle East or Asia?
A seller always gives his first offer way above he really expecting. Just to let a buyer a feeling of real barging.
So Dutch could ask 10% then get – after very “hard work” of negotiators – 6.7% and you would also say “they did Ok”? ;-)
“Icesave was not advertised in Iceland as it was especially intended to tap money from the UK”
Here is the link to Icesave UK web site as it was in 2006-2008. Icesave UK was for UK residents only :-)
http://web.archive.org/web/*/http://www.icesave.co.uk/
The effectiveness of a negotiator should perhaps be judged by the result and not by the difference between the initial and final positions… An interest rate result of 5.5% is effectively profiteering by the UK by 1.5% and by the Netherlands by 1%. There was time and scope to negotiate a lower rate, but Iceland’s negotiators incorrectly and unsuccessfully focussed for months on other terms of the agreement. That’s the simple truth (as I put in my first comment).
Thanks Bromley86. Apart from terminology to cater for structural differences within each country – the agreements look identical. This is reflected within 16.2.2 of the Dutch agreement it states:-
“Given the similarities between this Agreement and the UK Loan Agreement, the Parties agree that the English courts are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.”
The link relating to the ‘Memorandum of Understanding’ document dated 11 October 2008 is interesting. It could possibly indicate that Iceland did negotiate a reduction, or that the Dutch came into line with the more reasonable and ‘gentlemanly’ UK on the issue of interest rates :)
>So why then are we offered 5.5% not 3.5% and not a longer payment period?
We can now access those documents that have been released ahead of the Althingi vote. Lots of readin there, much of it in English (even if the link title isn’t):
http://www.island.is/endurreisn/stjornvold/adgerdir-stjornvalda/samantekt-adgerda/icesave-samningurinn/skjol-vegna-icesave-samningsins/
Looks like the negotiators did okay, as they’ve reduced the Dutch interest rate from the 6.7% that was agreed to back in 2008, as well as extending the period by 50%.
http://www.island.is/media/frettir/11.pdf
Alexander:
You said:
“UK/Dutch are not EU neither EEA/IMF etc. They are just two countries. So they might get angry but this doesn’t mean EU gets angry.”
I do not think so. In cases like this the EU usually draws one line: example:
http://newsfrettir.com/politics/general/1025-arni-was-on-the-defence-
”
Just one moment – Icesave didn’t serve Icelanders – means that “standard” EU/EEA rules don’t apply as they are written.
If Icesave was just a “part” of Landsbanki then I – as Icleandic resident could open account there. But I couldn’t. So it might have been “a part” but as rather special part.
”
Icesave was not advertised in Iceland as it was especially intended to tap money from the UK and NL since Landsbanki became unable to borrow the money it needed from other banks which were losing confidence. As Iceland is a place with just 300.000 people larger markets were targeted.
There were no restrictions for icelanders or other nationals to open an account with Icesave in for instance the Netherlands, however it would not have been a wise decision :-)
And Icesave was specifically marketed as a part of Landsbanki : it was even part of the logo:
http://www.vakantienaarnoorwegen.nl/ICESAVE%20BANK%20LOGO.jpg
>Unless you have a desire to believe, it was obvious that Brown got it wrong, confused KSF and Landsbanki and then started babbling.
Bromley86 – the point I made re flying saucers – perceptions are not facts.
https://www.icenews.is/index.php/2009/06/26/rejecting-icesave-deal-could-be-akin-to-declaring-war/#comment-83635
Fisy or should I say ‘Wolfie’ – I smiled at the support received from your ‘followers’.
https://www.icenews.is/index.php/2009/06/26/rejecting-icesave-deal-could-be-akin-to-declaring-war/#comment-83889
The ‘Tooting Popular Front’ lives on… Afram Island !
http://en.wikipedia.org/wiki/Citizen_Smith
Brumley, Brown was lying about the IMF ( according to the IMF rep ) so why would he be ” confused ” between Landsbanki and Kautphing Singer and Friedlander ?
Do you think he got ” confused ” when he agreed with Darling to have KSF taken as well on that fateful day in October including that GBP 550 millions of KSF IOM monies that did not belong to KSF ?
The whole transcript of the parlimentary answer shows a pattern of falsehood about the Icelandic bank situation which may as a result have made its way into the WSJ article.
I do wonder if you actually watched the same as rest of us listeners.
>Regarding the take-down of KSF, do you have any evidence that it could have survived a full-blown run in the UK?
Let me put it this way – as it is valid point although we’ve talked about it before — Kauthping had more long term bond holder than Landsbanki IceSave so it could have survived with money being sent as is documented from it own accounts, sales and loan of Icelandic Central bank:
https://www.icenews.is/index.php/2009/06/22/haarde-in-dublin-ireland-worse-than-iceland/#comment-82891
And you well know the Kaupthing Edge German depositor got all they money back ( despite German DZ Bank seizing EUR 55 million of monies as well ).
Why also Brumley do you think that the UK high court has granted judicial review of the decision to take down the bank when it was refused for Northern Rock ?
https://www.icenews.is/index.php/2009/04/20/all-kaupthing-edge-deposits-in-germany-to-be-repaid/#comment-73215
>Or was it that they were listening to Brown talking Parliament about this ( well rather he was lying ) when fallsely asserted
Unless you have a desire to believe, it was obvious that Brown got it wrong, confused KSF and Landsbanki and then started babbling. You even quoted the line that shows that “The fact is we are not the regulatory authority [of Kaupthing Singer and Friedlander]”.
Regarding the take-down of KSF, do you have any evidence that it could have survived a full-blown run in the UK? There were something like £2.5bn of UK deposits, and although they were always going to be covered by the FSCS (if under the £50 limit), why would anyone take the risk? After those less prone to panic were burned with Icesave, there really wasn’t any loyalty to the Iceland brand over here.
Fisy:”It is very clear that no one that reviewed this situation disputes that the freedom of establishment via branch is wrong when applied to banks and only EU burecrats wont admit it.
But what can UK agencies do to avoid this kind of problem in future. Well maybe they can not listen to politicial pressure to take down a UK registered and regulated bank that was not insolvent.”
Make up your mind, should the EU/UK have stopped Icelandic banks operating in the UK becuase they are insolvent or should they have not stopped Icelandic banks collecting more deposits to prevent them becoming insolvent.
Either way, according to you, its everyone else’s fault for everything Iceland did.
In that WSJ article we see more poor journalism — still amazes me this fundemental errors in serious publications like this :
“Therefore, in the case of Iceland, which isn’t an E.U. member but part of the European Economic Area and thus subject to E.U. single-market rules, the U.K. Financial Services Authority only had the power to make sure the three bank branches of Landsbanki Islands hf, Kaupthing Bank hf and Glitnir Bank hf, weren’t involved in market abuse and treated customers fairly. ”
Or was it that they were listening to Brown talking Parliament about this ( well rather he was lying ) when fallsely asserted “”The fact is we are not the regulatory authority [ of Kaupthing Singer and Friedlander ]”:
http://www.youtube.com/watch?v=ivmYGlFu_bg Brownto UK Parliament on 6th May (see 00:30 for him telling this lie and look at Darling twitching as he says the lies )
It would be so convenient for Brown and Darling if Kauphing Singer and Friedlander was a branch not a subsidiary fully under the UK FSA oversight.
But it wasn’t a branch.
You will also note in there that Brown also states:
“And that is why we are in negotiations with the IMF and other organizations about the rate at which iceland can repay these losses that they are responsible for.” (00:45)
So why then are we offered 5.5% not 3.5% and not a longer payment period?
Peter – London again:
>The EU passed judgement in November, there is no further discussion on the
>issue, Iceland will pay the depositor protection if it wants to stay in the EFTA.
>
>The EU is one country – all citizens will be treated and protected equally by all
>member states.
Your daunting expertise continues to wow me:
https://www.icenews.is/index.php/2009/06/26/rejecting-icesave-deal-could-be-akin-to-declaring-war/#comment-83957
https://www.icenews.is/index.php/2009/06/16/where-have-all-the-billionaires-gone/#comment-82475
But wait ..
Bjarni wrote in that thread there:
>There are now some movements to change the EU regulations (passport >rules) to limit the opening of branches for foreign banks. See: http://online.wsj.com/article/BT-CO-20090619-706620.html
“The government believes that more is needed to prevent a recurrence of the experience of Icelandic bank failures in the U.K.,” the UK treasury said in its response to a parliamentary report on the impact of Iceland’s financial crisis on the U.K. ”
It is very clear that no one that reviewed this situation disputes that the freedom of establishment via branch is wrong when applied to banks and only EU burecrats wont admit it.
But what can UK agencies do to avoid this kind of problem in future. Well maybe they can not listen to politicial pressure to take down a UK registered and regulated bank that was not insolvent.
That would help. You know Peter, bank like Kautpthing Singer and Friedlander.
https://www.icenews.is/index.php/2009/06/22/haarde-in-dublin-ireland-worse-than-iceland/#comment-82891
To Peter – London:
>>>>“”Icesave was not a bank,” Yes it was.
Actually, Icesave was branding name for foreign accounts of Landsbanki. It was well known, especially in UK and Netherlands, while most Icelanders hardly knew it existed (they definately do now!).
But your questions remains valid:
>>>>Registered, licensed and regulated by Iceland’s democratically elected government. If it wasn’t, why didn’t the regulator shut it down?
Turns out, Landsbanki was in almost every material way, adhering to all the banking regulations, both Icelandic and EU, and therefore couldn’t be easily stopped or shut down. Various respective governments (including the Icelandic) were very worried about how quickly the IceSave accounts were growing, but couldn’t do anything legally to stop it.
With the benefit of hindsight, it is possible to point out to few things that possibly could have been done. But we have to take into account, that during most of 2007-2008, most governments were simply unprepared for the great banking crisis that in September and October after the Lehmans Brother fall. I am sure if they had known, many would have done things differently.
If you want to read more about the Icelandic banking crash, the Icelandic government has now published most of the letters, analysis, reports and legal opinions from before and after the bank crash.
Probably the best analysis on the subject is the report by Kaarlo Jännäri (25), which is a retired Director General of teh Finnish Financial Supervision Authority. Chapter 3. provides detailed account of what happened before, during and after the crash.
http://www.island.is/endurreisn/stjornvold/adgerdir-stjornvalda/samantekt-adgerda/icesave-samningurinn/skjol-vegna-icesave-samningsins/
The index is in Icelandic, but many of the documents referred are in English.
Jim said:
“Icesave was just a brand that was operated by Landsbanki.”
Thats not really relevant, it was the name of a collection of bank accounts, operated by Landsbanki bank. It was the name they chose to use instead of Landsbanki within some EU countries.
Peter – Icesave was just a brand that was operated by Landsbanki. Icesave was not itself a bank. Think of the Focus brand used by the Ford motor company. Focus is just a brand. Focus is not itself a car company.
Alexander E. said:
“UK/Dutch are not EU neither EEA/IMF etc. They are just two countries. So they might get angry but this doesn’t mean EU gets angry.”
The EU passed judgement in November, there is no further discussion on the issue, Iceland will pay the depositor protection if it wants to stay in the EFTA.
The EU is one country – all citizens will be treated and protected equally by all member states.
“Icesave was not a bank,”
Yes it was. Registered, licensed and regulated by Iceland’s democratically elected government. If it wasn’t, why didn’t the regulator shut it down?
>Just one moment – Icesave didn’t serve Icelanders – means that “standard” EU/EEA rules don’t apply as they are written.
You’d need to show that banks are not allowed by EU law to offer different rates/accounts in different countries from the same branch.
But, as no one in the Icelandic government and none of their qualified advisors has come up with this angle, you might want to save yourself some time and not bother :P .
You’re right about the UK/NL /= EU, but they are on the inside whilst Iceland is not. The effect of that appears to be apparent from the folowing article, although specific mention of the Germans might indicate that they had their own feelings either because of KE or the bonds.
http://newsfrettir.com/politics/general/1025-arni-was-on-the-defence-
@kaj. The situation is that Landsbanki was a private bank BUT the Icelandic government was required to guarantee depositors 20k euros and to monitor it. No one disputes the basics here, the only question was whether Iceland was required to back the guarantee or just to help it if they felt like it.
Everyone agreed that they were required to back it back in November. Okay, Iceland only agreed because otherwise no one in the world (and this is not an exaggeration, excepting perhaps the Faroes) would lend them any money unless they agreed.
To Alexander E.:
>>>>I think there is a gross error in your “caulculations” UK/Dutch are not EU neither EEA/IMF etc. They are just two countries. So they might get angry but this doesn’t mean EU gets angry.
I actually spent some time thinking about this very point. Originally, I was thinking that UK/Netherlands would try to make some kind of trade sanctions by themselves, but then I thought it wouldn’t make much sense for them to do it unless they somehow convinced EU to go along. But you might be right, it is probably quite unlikely that rest of EU would participate in trade sanctions against Iceland.
In fact, I think both b) anc c) options are both quite unlikely, but you never know. We are in unchartered territory here.
Personally, I think option a) is the most likely consequence, at least as for the IMF loans. If the Nordic countries decide to withhold their loans too, Iceland would be in big trouble.
The main point I was trying to make is that there is no one “correct” answer to whether we should accept or reject the loan guarantee (or try to modify it). No matter what we do, Iceland faces a significant chance of a sovereign default over the next few years. Some people are indeed pointing out, that if we have to do it, we should then do it sooner rather than later.
But, in any case the Icelandic government should definitely have a good “Plan B” ready in case the agreement is rejected.
“- UK/Netherlands get very angry
a) IMF/Nordic countries withhold loans -> sovereign default
b) Iceland thrown out of EEA -> sovereign default
c) EU applies trade sanctions -> sovereign default
– EU Application delayed”
Bjarni.
I think there is a gross error in your “caulculations”
UK/Dutch are not EU neither EEA/IMF etc. They are just two countries. So they might get angry but this doesn’t mean EU gets angry.
And indeed there is no need to jump from the cliff just to please two countries. I understand their pressure – as in case the matter goes to court the result might be hell different.
Just one moment – Icesave didn’t serve Icelanders – means that “standard” EU/EEA rules don’t apply as they are written.
If Icesave was just a “part” of Landsbanki then I – as Icleandic resident could open account there. But I couldn’t. So it might have been “a part” but as rather special part.
Well, anyway let’s see what the queen will do if… :-) Will she order execution of “bad” cards in Parliament or use plan Y…
PS. Icesave was not a bank, kaj ;-)
Isn’t Icesave a private bank? Why should islanders pay a dime? They did not make these loans. Socialism for the rich? Only one with the brains seems to be the that Progressive Party representative.
Here’s a legal review of the terms of the loan agreements:
http://www.island.is/media/frettir/24.pdf
Jim:
“Because the goal of these agreements isn’t for the UK and Netherlands to make the maximum possible profit by exploiting the currently high CDS rates.”
CDS rates would indicate a rate of 12-13% not the 5.5% offered. “Currently high CDS rates” are not likely to return to low levels for a very long time as Iceland now has massive long term debts and liabilities which dwarf the Icesave debt.
I find it amazing that the Icelandic government says they have no “Plan B”, in case the agreement is not accepted by the parliament, considering that there is probably only at best about 50/50 chance of that happening.
Whether or not the government believe they are right, they should definitely be prepared for all eventualities. Otherwise they are no better than the last government we had.
Iceland now faces a classic Blue pill / Red pill decision. Do we accept the agreement as negotiated or not?
Here below is a quick analysis of all the possible outcome scenarios, I could think of:
Accept the agreement (blue pill)
——————————–
– No payment to UK/Netherlands for first 7 years
– Application for EU
a) EU allows exception from CFP -> Iceland joins EU
b) No exception from the CFP -> Iceland declines EU
– World economy recession or recovery
a) Fish/energy exports drop -> sovereign default
b) Exports prices keep up -> Iceland survives
– Landsbanki cases resolved in bankruptcy court
a) depositors loose priority -> sovereign default
b) court cases take too long -> sovereign default
c) depositors keep priority -> Iceland survives
– Old Landsbanki liquidated
a) Low percentage assets recovered -> sovereign default
b) High percentage assets recovered -> Iceland survives
– Payments to UK/Netherlands 300-400M GBP/year after 2016
a) payments not renegotiated -> sovereign default
b) payments reduced to 2-4% of exports -> Iceland survives
– Extra option
a) Oil found on Drekasvaedid -> Iceland survives
Refuse the agreement (red pill)
——————————-
– UK/Netherlands get very angry
a) IMF/Nordic countries withhold loans -> sovereign default
b) Iceland thrown out of EEA -> sovereign default
c) EU applies trade sanctions -> sovereign default
– EU Application delayed
As you can see there is no “correct” answer to this question. No matter what we do, we face multiple potential fatal outcomes, that will almost certainly result in sovereign default for Iceland. Of course this list is greatly simplified for the sake of brevity. Treat each “sovereign default” as most likely result, not 100% certainty.
As I have mentioned before in a different thread:
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82896
it is relatively easy to calculate, that the current agreement if not changed, will almost certainly lead to sovereign default of Iceland after 2016.
As shown in the list here above, this does not mean however, that refusing the agreement will automatically make everything work out well. It is probably just as dangerous for Iceland. But since then the outcome depends mostly on the actual response chosen by the UK/Netherlands/EU/IMF, it is not as clear cut what the final result will be and therefore more difficult to debate it.
So do we stay in Wonderland and see how deep the rabbit-hole goes? :-)
Of course in a typical Icelandic fashion, there are many other alternatives also being discussed, where Iceland would agree with the basic loan guarantee, but only with modified terms. We could therefore call those options the purple pill :-):
Modify the agreement (purple pill)
———————————-
– Icelandic parliament
a) Accepts agr without the guarantee -> Iceland survives
b) Accepts with payment cap (1-2% GDP) -> Iceland survives
c) Accepts 20K guarantee, not interest -> Iceland survives
d) Requests renegotiation of guarantee -> Start whole process over
– UK/Netherlands still get very angry
a) who knows :-)
That’s twice I’ve picked up on the same point as Bromley86. Spooky!
“I’m confused about why people think Iceland should be given a lower interest rate”
Because the goal of these agreements isn’t for the UK and Netherlands to make the maximum possible profit by exploiting the currently high CDS rates.
>I’m confused about why people think Iceland should be given a lower interest rate.
Where people have thought about it, as opposed to saying “we can’t” or “we won’t”, you’ll often see something like what Jim has posted. Presumably arrived at from 2% being apparently roughly what the IMF charge (and people like the Citizens’ Movement don’t want the IMF loan!!) and 4% that the UK is currently facing to borrow money.
Of course, all that assumes that the UK should make a loss on this loan, presumably from goodwill. Perhaps if they hadn’t had such a struggle to get to an agreement (or even an acceptance of liability), then that goodwill would be more likely to have existed.
Well Plan B will come from the parties that form government when this one fails as the bill does not pass.
Because this is the most ridiculous thing I have heard from this Red-Green government of all things including the lap dancing ban and forcing of women quota onto boards of companies.
I always knew Steingrímur was one the crazies in ideas but now Jóhanna proves without a doubt that she deserves to become an EU commissioner.
( She has exactly the damn the idiot citizens and make them pay for our mistake way of working that makes perfect for position in EU burecracy.
But as a responsible Prime Minister of Iceland? Absoltely not.)
BTW did any of you fellow tax payer see the interview of Percy and Bogi yesterday night on RUV 1 and what did you think of his answers ?
http://ruv.is/heim/ahugavert/nanar/store218/item288029/
http://blogg.esb.is/?p=76
I’m confused about why people think Iceland should be given a lower interest rate. Isn’t the CDS rate for Iceland something like 8-9% which would give a figure quite above that for loans to the Icelandic state? 5.5% seems generous compared to what else is available, plus there is a 7 year wait before any payments have to be made.
Hi Alexander E.
When translating stories I usually prioritise correct and realistic sounding English over strictly accurate translation.
With that in mind, here is the original – see what you think:
“Jóhanna S. sagði (…) að það hvarfli ekki að henni að frumvarp um ríkisábyrgð vegna Icesave samningsins verði fellt á Alþingi.” – Fréttablaðið
Regards
Alex, editor
“it has barely occurred to her that parliament might vote against”….
I would like to here it in Icelandic. But if wording is correct – it sounds like Komrad Stalin has never died. He also barely thought someone might have disagreed with him.
If she doesn’t understand what Parliament is for – then she might think she can manage country by orders of “her majesty”. Bur sorry, girl, you are not a Queen.
Iceland’s negotiators should have obtained a loan interest rate somewhere between 2% and 4%. Therefore, with a 5.5% rate, the opposition is probably right that “the bill is an attempt by the government to rationalise the unsatisfactory contract result from intergovernmental negotiations”. Perhaps the government should be compelled to release documentation (eg under freedom of information) regarding the interest rate negotiations. And it doesn’t take too much imagination for a “Plan B” to involve a lower interest rate!