Iceland government falls

[Jan Klimkowski]

From the Open Letter:

Let’s also put this debt into perspective: 320.000 people live in Iceland, each and every person on the island, including children and the elderly, the disabled and the poor, would have to pay around $30,000 under the bill. The danger if Icelanders will accept this enormous burden is that the entire welfare system would simply collapse with no money to run it. On January 5th the Icelandic president had the courage, backed up by his nation, to place the interest of the people before that of the banks.

Eloquent and courageous.

[Jan Klimkowski]

Some important background, which clearly demonstrates the culpability of the regulators in what is now exposed as an attempt to loot and impoversih ordinary Icelanders.

A fair deal for Iceland


Britain shares responsibility for Icesave losses – it must not expect Iceland to carry an impossible financial burden.

Ann Pettifor
guardian.co.uk, Friday 8 January 2010 17.49 GMT
Today the people of Iceland, a country whose population, at 317,000, is somewhat smaller than Leicester's, are required by the British political, financial and economic establishment to carry the full burden of the losses suffered by Landsbanki's depositor programme Icesave.

We consider this to be unfair, for the following reasons. First, the British political and financial establishment bear co-responsibility with Icelandic regulators and bankers for the losses of British investors. Indeed Iceland's financial policies and practice fell foursquare within the deregulated and liberalised framework set in Britain and the United States since the 1970s. We therefore bear a greater share of responsibility.

Well after the credit crunch froze interbank lending in August 2007 – a day we have dubbed "debtonation day" – the then-president of the Royal Economic Society of Britain, Professor Richard Portes, published a report on the state of Iceland's financial sector.

His November 2007 report was uncontroversial with Britain's and Iceland's regulators, economists, bankers and investors. It assumed that the Anglo-American liberalisation model to which Iceland's government had succumbed was a fixed, sound and immutable system – for Iceland and the rest of the world. It commended the "successful and resilient" banks of Iceland. That small country's financial system, enthused Portes, was based on "an exceptionally healthy institutional framework. The banks have been highly entrepreneurial without taking unsupportable risks. Good supervision and regulation have contributed to that, using EU legislation."

Portes went further, complaining that "market suspicion" had caused the mini-crisis of early 2006, and that Icelandic banks "had lower ratings than their Nordic peers". He saw "no justification for this in their risk exposure." We now know that Portes was profoundly misguided, and that his report was misleading. Iceland's banks were dangerously over-leveraged, and dismissive of exchange rate risks. Supervision and regulation by the British government and the European Union was far from good. It was lax, irresponsibly so, and created victims of those investors that had, in good faith, trusted the judgment of orthodox economists and the supervision of regulators.

Given this co-responsibility for the crisis, Britain, the EU and other governments should not resort to force majeure to put Iceland in a "debtors' prison", to quote the Financial Times.

Britain is a country of 60 million people. If we took full responsibility for the losses incurred by private investors in Icesave, it would cost every UK citizen about £36 in total. If the burden for these nationalised losses is to be carried wholly and exclusively by every Icelandic citizen – man, woman and child – the cost would be a prohibitive £6,800 each, impacting harshly on their lives and public services.

Acceptance of co-responsibility would help rebalance this inequitable division of losses. The postponement by the Icelandic president of the debt repayment legislation, pending a national referendum, gives the British Treasury the chance to withdraw its punitive approach and reach a fair outcome to the crisis.

http://www.guardian.co.uk/commentisfree/...-investors

[Magda Hassan]

01/13/2010

FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

SIPDIS

TREASURY FOR SMART AND WINN, NSC FOR HOVENIER, DOD FOR FENTON

E.O. 12958: DECL: 01/13/2020
TAGS: ECON, EFIN, IC, PGOV, PREL
SUBJECT: LOOKING FOR ALTERNATIVES TO AN ICESAVE REFERENDUM

REF: REYKJAVIK 9

Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D)

1. © Summary. CDA met with Ministry of Foreign Affairs Permanent
Secretary Einar Gunnarsson and Political Advisor Kristjan Guy Burgess
January 12 to discuss Icesave. After presenting a gloomy picture
of Iceland's future, the two officials asked for U.S. support. They
said that public comments of support from the U.S. or assistance in
getting the issue on the IMF agenda would be very much appreciated. They
further said that they did not want to see the matter go to a national
referendum and that they were exploring other options for resolving the
issue. The British Ambassador told CDA separately that he, as well as the
Ministry of Finance, were also looking at options that would forestall
a referendum. End Summary.

2. © CDA met with Permanent Secretary Einar Gunnarsson and Political
Advisor Kristjan Guy Burgess at the Icelandic Ministry of Foreign Affairs
on January 12 for a two hour marathon meeting to discuss Icesave. The
Icelandic officials painted a very gloomy picture for Iceland's
future. They suggested that the most likely outcome for the country
was that the Icesave issue would fail in a national referendum. Should
that occur, they suggested, Iceland would be back to square one with
the British and the Dutch. The country, however, would be much worse
off because it would have lost international credibility and access to
financial markets. Gunnarsson suggested that the Icesave issue, if it
continues along its present course, would cause Iceland to default in 2011
when a number of loans become due and could set Iceland back 30 years.

3. © The two government officials stressed that Iceland needs
international support. CDA reiterated that the United States was neutral
on this bilateral issue and hoped for a speedy resolution. Moreover,
the U.S. had supported Iceland's position at the last IMF Review and
expected to do so again depending on the circumstances. Gunnarsson and
Burgess responded that they understood the United States' stated position
of neutrality on the issue; however, they expressed the view that it
was impossible to remain neutral regarding the Icesave matter. Iceland,
they said, was being bullied by two much larger powers and a position
of neutrality was tantamount to watching the bullying take place. They
suggested that a public statement from the U.S. in support of Iceland
would be very helpful. They also felt that U.S. intervention in the
IMF could be of assistance, specifically if it was targeted at getting
Iceland's review placed on the IMF agenda. Gunnarsson acknowledged that
U.S. support during the review was appreciated but, realistically,
the issue would never make it on the agenda unless external pressure
was applied on the IMF.

4. © Gunnarsson and Burgess were extremely pessimistic regarding
the national referendum and said that the Government of Iceland was
exploring other options to resolve the Icesave situation. They hinted
that renegotiation might be a viable alternative and referenced recent
meetings between the government and the opposition at which this option
was discussed. Everyone could potentially save face, they suggested,
if a new repayment agreement was reached with the British and Dutch that
could possibly include a lower interest rate for the loan. This solution,
they felt, would be palatable to the Icelandic people and potentially
to the opposition as well. They did not know, however, whether the
British and Dutch would agree to another round of negotiations. They
also acknowledged that any new agreement would have to be approved in
parliament and, of course, signed by the president.

5. © On January 13, CDA also discussed the situation with British
Ambassador Ian Whiting who said that Britain might consider options that
would forestall a national referendum on the Icesave issue. The Ambassador
said, however, that the British Government was receiving mixed messages
from the Icelanders who, one week ago, seemed content to move forward with
a referendum (as the Prime Minister had conveyed to her UK counterpart)
but now appeared to be looking at other options. For example, the Ministry
of Finance was already looking at ways to improve the agreement but not
undermine the obligation or certainty of payment. He outlined for CDA
a potential solution that he was exploring that would involve Norway
loaning Iceland the money to cover the Icesave debt. This idea, he felt,
had merit because it would create a situation in which the Icelandic
Government was dealing with a country that it perceived to be sympathetic
to its situation, a fact that could remove some of the animosity from the
renegotiations. Negotiating a good loan repayment agreement with Norway,
said Whiting, would allow both sides to claim victory. The British and
Dutch would receive their money and Iceland would be able to repay its
debts under more favorable terms. He was going to discuss the idea with
the Norwegian Ambassador that same day.

6. © On January 13, CDA also met Iceland's Ambassador to the United
States Hjalmar Hannesson who was in Iceland. The Ambassador described
the potential constitutional crisis that would likely ensue should the
referendum go forward and fail, in essence a vote of no confidence. In
that case, the constitutionally apolitical Head of State would have
brought down the elected government, a possibility that several former
politicians in both parties had long ago agreed should not happen. Despite
his and his family's long association with the Progressive Party,
Hannesson said that this was not the time for elections or a change of
government. He added that he did not sense a willingness on the part
of the opposition to take control of the government. Noting that the
President, whom he has known for years, is considered "unpredictable,"
he hoped that a solution palatable to all sides in Iceland could provide
a way out.

7. © Comment: It is quickly becoming clear that very few of the
involved parties are comfortable with the Icesave issue being put to
a vote in a national referendum. Both the ruling coalition and the
opposition appear to understand that they must present a united front
for there to be any possibility of discussing alternative solutions with
the British and Dutch. At present, such cooperation remains elusive;
however, a number of closed door meetings between the opposition and
government will take place in the coming days to explore the full range
of potential solutions and, hopefully, to forge consensus. All of this,
however, remains in flux. WATSON
http://wikileaks.org/file/us-watson1-2010.txt

[Magda Hassan]

Iceland repayment talks collapse


Icesave's parent bank, Landsbanki, collapsed in 2008

Talks to agree how Iceland will repay more than $5bn of debt it owes to the UK and the Netherlands have broken down without agreement.
The collapse of the Iceland-based Icesave online bank in October 2008 hit savers in both countries.
The UK and Dutch governments, which compensated savers, want Iceland to repay 3.8bn euros (£3.3bn; $5.4bn).
However, the three governments have been unable to agree on revised payment terms after a week of negotiations.
"We had hoped to be able to reach a consensual resolution of this issue on improved terms, but this has not yet been possible," said Iceland's finance minister Steingrimur Sigfusson.
In a statement, the UK and Dutch governments said they were "very disappointed that despite all the efforts over the past year and a half, Iceland is still unable to accept our best offer on the Icesave loan".
Stricken economy
Iceland plans to hold a referendum on the Icesave repayment on 6 March, but the government was hopeful it could reach a different deal ahead of that.
Opinion polls suggest that a majority of Icelandic voters would reject the repayment plan.
The dispute has delayed International Monetary Fund help for Iceland, which Reykjavik needs to shore up its stricken economy.
The country's parliament voted for a referendum on the Icesave bill after President Olaf Ragnar Grimsson vetoed the repayment to the UK and the Netherlands.
Opponents say the repayment plan forces Icelandic taxpayers to pay for bankers' mistakes.
The dispute has also overshadowed Iceland's application to join the EU, which was submitted in July.
Iceland's economic crisis persuaded many of its politicians that it would be better off inside the 27-nation bloc.

http://news.bbc.co.uk/2/hi/business/8537862.stm

[David Guyatt]

From Magda's post No 13:

Political Advisor Kristjan Guy Burgess

I'm not attempting to ski off piste here, but what a curious name?

[Magda Hassan]

From Magda's post No 13:

Political Advisor Kristjan Guy Burgess

I'm not attempting to ski off piste here, but what a curious name?

Yes! I noticed that too. Most curious.

[Jan Klimkowski]

Opinion polls suggest that a majority of Icelandic voters would reject the repayment plan.

Good on 'em.

Democracy in action, surely.

Except that the ruling elites will regard the people of Iceland as making the "wrong democratic choice" if they vote to reject banker-induced penury and shock therapy.

Gordon Brown will have to use those anti-terror laws against Iceland again, and invoke Tony Blair's doctrine of regime change.

I'm sure the spooks can cobble together some false flag threat: perhaps Iceland has the capability to launch Bjork as a suicide bomber against the homeland within 52 minutes and 19 seconds.

Whilst singing the inspired but, shurely diabolic, Hyperballad and Human Behaviour.

http://www.youtube.com/watch?v=NqB5m_XHy...re=related

http://www.youtube.com/watch?v=vPTby0N11...re=related

:bandit:

[Jan Klimkowski]

A new British government.

The same abuse of anti-terror laws and the same obscenely punitive punishment for daring to challenge the looting of global market capitalism:

UK may try to stop Iceland joining EU over bank collapse refund

Iceland put on fast-track to join the EU but acrimony lingers over £2.3bn owed from Icesave collapse

Iceland was put on a fast track to join the European Union today, but the Cameron government served notice that it could block the country's membership unless it settled the £2.3bn Britain says it is owed as a result of the country's financial collapse two years ago.

European government chiefs at a Brussels summit decided that "accession negotiations should be opened" with Iceland. At British and Dutch insistence, however, the summit said that Iceland would have to address "existing obligations such as those identified by the European free trade area surveillance authority", a reference to the fallout from the collapse of Icesave in 2008 that left 400,000 depositors in Britain and the Netherlands fearing for their savings.

The Icesave dispute generated acrimonious negotiations, with the terms for reimbursing the British and Dutch rejected first by Iceland's president and then by the Icelandic public in a referendum.

Earlier this week, William Hague, the foreign secretary, made it plain that Britain could veto membership unless the dispute was settled. "Iceland will have to recognise its obligations," he said. "We won't block [opening negotiations], but we will want it clear at the start that Iceland meets its financial and legal obligations."

"We've taken note of that," Stefan Haukur Johannesson, Iceland's chief negotiator with Brussels, told the Guardian. "It's a contentious issue between our three countries. But we don't see it as linked with the accession process."

In October 2008, following the collapse of Landsbanki, Icesave's parent, the Brown government sparked outrage in Iceland by invoking anti-terrorism laws to freeze Icelandic assets in Britain. The government in Reykjavik denounced the UK move as "an absurd decision".

Johannesson said that it was "self-evident that we will live up to our obligations" but insisted there could be no direct linkage between the financial row and the European negotiations.

Iceland is otherwise likely to have a relatively smooth passage through the negotiations because it is in effect already part of the European single market.

The biggest issue will be fisheries where Iceland, a tiny country, is a superpower. It would instantly become the EU's biggest fishing nation, overtaking Spain. It also practises highly successful and pioneering fisheries policies whereas the EU's common fisheries policy is widely discredited as ruinous.

The biggest problem for Iceland joining may ultimately lie in popular opposition to pooling its sovereignty. Opinion polls recently have shown growing reluctance to join the EU. At the height of the financial crash two years ago, Iceland's attitude underwent a sea-change because its currency, the krona, was virtually wiped out and the adoption of the euro became attractive.

http://www.guardian.co.uk/business/2010/...iceland-eu

[Jan Klimkowski]

Belated but welcome:

Former Iceland PM faces trial over bank collapse

Icelandic lawmakers have concluded the country's former prime minister ought to be tried for "economic negligence" over the catastrophic failure of its banking system and currency.

September 12, 2010

A special investigation committee, known popularly as the Truth Commission, recommended that Geir Haarde, the former prime minister, stand trial, along with Björgvin Sigurdsson, the former minister of commerce, and Árni Mathiesen, the former minister of finance.

It found during an 18-month inquiry that the three men showed recklessness in their handling of Iceland's financial crisis, which brought down its three banks and crippled the currency in October 2008.

The crisis also sparked a diplomatic row with Britain over the £2.3 billion bill for the failure of Icesave, an internet bank based in Reykjavik that offered high-interest rate accounts to UK savers.

Iceland's taxpayers must now foot the £2.3 billion bill for the first £22,000 in compensation to each British saver, as well as dealing with unprecedented economic austerity and 20pc lower salaries. The crash also left British councils, hospitals and universities £1 billion out of pocket.

Iceland's investigation committee proposed that the Nordic nation's parliament set up a special court, called the Landsdómur, to try the politicians under laws covering ministers' accountability.

Its report says that Mr Haarde and his colleagues ought to have realised the extremely serious nature of Iceland's financial problems more than six months before the crash – but claims they failed to act.

The committee concluded that officials "lacked both the power and the courage to set reasonable limits to the financial system".

Investigators said the billionaire owners of Iceland's banks – Kaupthing, Glitnir and Landsbanki – had an overly cosy relationship with political leaders, meaning the authorities failed to rein them in.

The recommendation to try the former ministers was supported by a five out of the nine lawmakers sitting on the commission, with opinions split down party lines.

Four right-leaning Independence Party politicians refused to back the recommendation that would see their former leader forced to defend his actions in court. Mr Haarde stepped down in spring 2009 amid mass protests about his role in the financial crisis.

Johanna Sigurdardottir, Iceland's left-leaning Prime Minister, called the report's conclusions "a serious accusation against our political system, our politicians, the parliament, stock market".

"It is a problem we must confront," she said, adding that the recommendation would have had more force if unanimous.

Iceland is still dependent on a $10 billion loan package led by the International Monetary Fund.

It wants to join the European Union, but the accession process has been held up by the row with Britain over its £2.3 billion Icesave debt.

http://www.telegraph.co.uk/news/worldnew...lapse.html

I see that Iceland is still suffering from Gordon Brown's unethical and bullying use of anti-terror legislation in the narrow British self-interest.

[Magda Hassan]

Better late than never. Only in a place like Iceland is something like this happeneing. All the other supra-national political and banking vandals are still on the loose and we are all told to just 'move on'.