".... that the [Irish] people put up with it is amazing."
Only country in Europe with Fluoride in the water supply, that's why.
Solutions for Ireland. Say NO to the IMF/World bank. Default on our debt. Print our own debt free currency. Nationalise the trillion euros worth of gas and oil off our west coast. Take back our fishing (200 billion worth). Get our farmers growing again. Done deal if our politicians had the backbone. ~ Jim Corr
Solutions for Ireland. Say NO to the IMF/World bank. Default on our debt. Print our own debt free currency. Nationalise the trillion euros worth of gas and oil off our west coast. Take back our fishing (200 billion worth). Get our farmers growing again. Done deal if our politicians had the backbone. ~ Jim Corr
Iceland’s President Olafur R. Grimsson will give his country’s voters the final say on repaying about $5 billion in debts owed to the U.K. and the Netherlands to cover depositor claims.
Grimsson’s announcement yesterday that he won’t sign a depositor accord struck between the three countries’ governments in December follows lawmaker approval of the bill. He told reporters he was responding to popular demand for a referendum after more than 42,000 of Iceland’s 318,000 inhabitants signed a petition asking him to block the accord. Forty-four of the Reykjavik-based parliament’s 63 lawmakers voted for the bill on Feb. 16.
“There is support for the view that the people should once again, as before, act together with the parliament as the legislator in this matter,” Grimsson said.
Yesterday’s announcement marks the second time Grimsson has rejected an agreement designed to compensate the U.K. and Netherlands for depositor losses stemming from the October 2008 failure of Landsbanki Islands hf. His Jan. 5, 2010, refusal to sign a prior accord prompted Fitch Ratings to cut Iceland’s credit grade to junk. Moody’s Investors Service and Standard & Poor’s give Iceland’s debt the lowest investment grade.
Grimsson’s decision threatens to sour relations with the U.K. and Netherlands after Iceland’s government persuaded the two countries to negotiate a new deal following last year’s rejection of the previous accord.
“We have taken note of the decision, negotiations are over and an initialled agreement is on the table,” Niels Redeker, a spokesman at the Dutch Finance Ministry, said by phone yesterday. “We expect the Icelandic government to consider the new situation and to contact us about what will follow.”
Clarification Sought
The U.K. Treasury said it also has “noted” Grimsson’s decision to block the latest agreement and that it looks forward to “clarification of the Icelandic position in the coming days,” in an e-mailed statement.
The latest so-called Icesave accord, named after the high- yielding accounts offered by Landsbanki, would cost the state about 47 billion kronur ($404 million), while the remaining debt will be covered using the proceeds of Landsbanki assets, the negotiating committee representing Iceland said in December. The British and Dutch governments bore the initial cost of backing the depositor claims.
Though the December Icesave accord is “significantly improved,” it still carries “significant risk,” according to Valdimar Armann, an economist at Reykjavik-based asset manager GAMMA. A slide in the krona, currently shielded by capital controls, could as much as triple the final cost, he estimates.
Tapping Markets
The central bank has said it plans to start easing capital restrictions, in place since the end of 2008, sometime after March. The government has also indicated it wants to tap international debt markets as early as this year as 713 million euros ($976 million) of debt falls due by December.
The government will now have to rethink its plans to sell Eurobonds this year, Finance Minister Steingrimur J. Sigfusson said in an interview yesterday.
“We’ll obviously have to stop and evaluate the position and see what the next days and weeks -- five, six weeks -- will bring us,” Sigfusson said. “It’s clear that this means that we’re not completing the matter in the next few days and that we’ll have to re-evaluate many of things we had been preparing.”
Credit default swaps, which fell below those of Spain last week, may rise as investors demand more to insure against the risk of an Icelandic default, according to Armann. CDS on five- year debt dropped as low as 223 basis points on Feb. 15, compared with 252 on same-maturity Spanish debt the same day, according to CMA data available on Bloomberg.
CDS Market
“The uncertainty that follows the decision could mean that investors will demand higher premiums against covering for an Icelandic default,” he said.
A referendum on Icesave will be held as soon as possible, Prime Minister Johanna Sigurdardottir said yesterday. The previous bill was rejected by 93 percent of voters in March last year. According to a January poll, 56.4 percent of the 800 voters polled backed the December Icesave agreement, Frettabladid reported on Jan. 25. The newspaper didn’t give a margin of error.
It is unclear whether the British and Dutch will be willing to resume talks should the bill be voted down in a referendum, Sigfusson told reporters shortly after Grimsson announced his decision. Sigfusson said yesterday he was planning to contact his counterparts in the two European Union members the same day.
Depositors
More than 350,000 British and Dutch Icesave account holders risked losing their savings when Landsbanki collapsed along with the rest of Iceland’s over-leveraged banking system in 2008. Moody’s, Standard & Poor’s and Fitch indicated last month they would consider raising their ratings on the island’s debt should Icesave be approved.
The 2008 failure of Landsbanki, Glitnir Bank hf and Kaupthing Bank hf led to the collapse of the currency and forced Iceland to go to the IMF to get a $2.1 billion loan, with a further $2.5 billion pledged by Nordic nations.
Icelanders and their President Olafur R. Grimsson wonder why it is the country's taxpayers' obligation to clean up the bad investment decisions made by banking officials.
It might be more fair to let the bankers hang from their thumbs while every penny was disgorged from their own and bank owners' pockets. I'm for that, myself, and think that US taxpayers should have had the guts to demand a similar result from banking fiascos here. That's capitalism according to Schumpeter: creative destruction.
If bank assets cannot cover the depositors' claims, that is indeed unfortunate. The mistakes, however, were not made by Icelandic citizens and tax-payers. Rough justice suggests that they have no obligation to make good the losses.
U.S. Constitution - Article IV, Section 4: NO BORDERS + NO LAWS = NO COUNTRY