Icelandic Prime Minister Johanna Sigurdardottir took the unusual step of writing an opinion piece for the Financial Times which went on the paper’s website yesterday evening. In her article “Icelanders are angry but will make sacrifices”, the PM lays out her version of why the Icesave deal is potentially unfair on Icelanders.
“Icelanders, who do not feel responsible for the global banking crisis, are willing to make sacrifices to secure normal relations and trade with the world. But they are angry at having to take on the burden of compensation for the Icesave savings accounts of Landsbanki – a failed, privately owned, commercial bank, which attracted hundreds of thousands of UK and Dutch savers with high interest rates. The amount to be shouldered by Iceland is huge – about 50 per cent of our gross domestic product. Assets against this debt will substantially lower the net amount, but there is much uncertainty about the valuations and forecasts underpinning such calculations.
“Last October, when Iceland was in deep crisis, UK authorities froze the assets of Landsbanki, and placed the bank (and for a while Iceland’s government) alongside terrorist organisations on the official UK Treasury list of entities subject to asset freezing. Kaupthing Bank, which had just been granted a government loan amounting to 5 per cent of GDP, then collapsed after its subsidiary in London was seized by the Financial Services Authority. Despite a critical report in April by the House of Commons Treasury Select Committee, no satisfactory explanations have been given for the UK’s actions,” Sigurdardottir writes.
In the course of the rest of her article, she argues that he EU depositor protection scheme which Iceland adhered to in its handling of Icesave is flawed: “The EU deposit insurance directive that places this burden upon us is seen by some as aimed at the failure of individual banks rather than a systemic collapse, as was the case in Iceland.”
Johanna Sigurdardottir reiterates her government’s desire to pass the contract and normalise international relations, but to also not be left with an unrealistic or unfair debt burden.
The article is available in full on ft.com, but only to registered users. It is, however, free to register.