Thread: With Economy On The Mend, Iceland Stuffs Bankers 2nd Time

With Its Economy On The Mend, Iceland Stuffs Bankers For Second Time

Submitted by Tyler Durden
04/10/2011 11:15 -0400
203 comments

In a shining example of how it can be done, Iceland, for the second time in as many years, by popular vote refused to provide up to $5 billion to Britain and Netherlands banks. The just completed referendum once again rejected a $5 billion Icesave debt deal, pushed on Iceland by its European banking brethren. "The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online "Icesave" accounts owned by Landsbanki, one of three Icelandic banks that collapsed in late 2008." And while Iceland PM Johanna Sigurdardottir did a brief Mutual Assured Destruction tour claiming "economic and political chaos could follow" we can't help but think we are witnessing the early stages of Europe's most flourishing economy over the next decade, while all other countries in Europe fail one after another due to their inability, unwillingness and cowardice to force bankers to experience, gasp, losses for fear of "reprisals." As for the "isolation" that Iceland is threatened with experiencing should it give banksters the finger, we are certain it is just a matter of a few months before some enterprising hedge funds, scrambling for yield career risk offsets, decide to take on the role of the IMF or of repeatedly insolvent Dexia, and lend directly to Iceland.

From the Sunday Morning Herald: http://www.smh.com.au/world/deposits-ac ... 1d99j.html

Icelanders have rejected a depositor claims agreement with Britain and Netherlands for a second time in as many years as voters signalled they did not want tax funds to cover foreign losses by a private bank.

Initial results showed 59.1 per cent of voters said ''no'' to the so-called Icesave agreement, while 40.9 per cent said ''yes'', based on figures published by a regional electorate commission, with about 90 per cent of votes counted.

''This matter will now be settled in the European Free Trade Association's court,'' Prime Minister Johanna Sigurdardottir said.
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The government had hoped Icesave would restore investor relations and end the isolation that has stalled Iceland's resurrection from its banking collapse.

M.A.D. - the geyser tour:

"The worst option was chosen. The vote has split the nation in two," Prime Minister Johanna Sigurdardottir told state television, saying it was fairly clear the "no" side had won.

State television said almost 60 percent of voters had rejected the agreement, based on results from five out of six voting districts, including capital Reykjavik. Many voters were against taxpayers footing the bill for irresponsible bankers.

Just over 169,000 votes had been counted out of the 230,000 eligible voters.

The prime minister, who had predicted a no vote would cause economic uncertainty for at least a year or two, did not say whether the government planned to resign.

"We must do all we can to prevent political and economic chaos as a result of this outcome," she said.

That's the fear mongering... And here are the facts in two easy charts.

Ever since Iceland decided to stop pandering to banker interests, and transfer its country's wealth to banks from Europe and Holland, its economy has in fact been on a constant upward trajectory.





Icelanders are angry:

Icelandic lawmakers in February backed a repayment plan agreed with creditors, but the president refused to sign the bill, triggering the vote. In March 2010, Iceland rejected an earlier Icesave repayment blueprint in a referendum.

"I know this will probably hurt us internationally, but it is worth taking a stance," Thorgerdun Asgeirsdottir, a 28-year-old barista, said after casting a "no" vote.

Svanhvit Ingibergs, 33, who works at a rest home, said: "I had no part in causing those debts, and I don't want our children to risk having to pay them. It would be better to settle this in a court."

Iceland is still pulling itself out of the recession which hit it after its bank crash, and policymakers and economists have said solving the Icesave issue would help the country get back into international financial markets.

Getting such funding is also part of a plan to end the controls on capital flows it imposed in 2008 to stabilise a tumbling currency.

The controls have left an estimated equivalent to a quarter of Iceland's gross domestic product in the hands of foreign investors, many of whom are expected to want to pull out. Ratings agencies follow the vote closely. Moody's has said it may lower its credit rating on Iceland in case of a 'no'.

And so a nation of 320,000 once again takes the baton of bankster liberation, while a country of 320 million continues to refuse to care, even as with each passing month another $150 billion in debt is added to the public debt total.

http://www.zerohedge.com/article/its-ec ... econd-time

UK and Netherlands to sue Iceland over lost deposits

10 April 2011 Last updated at 16:26 ET
379 Comments

Video at the link: Iceland's Finance Minister Steingrimur Sigfusson: "Icelandic people not prepared to accept payments"

The UK and Dutch governments are preparing court action against Iceland to recover 4bn euros (£3.5bn) lost when the country's bank system collapsed.

It follows a referendum in Iceland which rejected a repayment plan.

The UK said it was "disappointed" by the "no" vote, while the Dutch finance minister said the time for negotiations was "over".

Iceland's Finance Minister Steingrimur Sigfusson said that resolving the row in court would take at least a year.

But he told the BBC: "It is very important to emphasise that the UK and the Netherlands will begin to get their money back later this year."

He said the failed bank would be able to pay out on about 90% of claims from the UK and Dutch authorities.

The UK and the Netherlands say they are owed the money following the collapse of Icelandic savings bank Icesave. British and Dutch depositors were bailed out by their governments, which are now demanding their money back.

'Worst option'

Iceland held a referendum at the weekend on a repayment plan, but with about 90% of the vote counted, 59.1% were against and 40.9% in favour.

Johanna Sigurdardottir, Iceland's Prime Minister, said the rejection meant "the worst option was chosen" and had split the country in two.

The UK's Chief Secretary to the Treasury, Danny Alexander, called the decision "disappointing" and said the matter would go to an international court.

Speaking on the Andrew Marr programme, he said: "It's obviously disappointing... We tried to get a negotiated settlement.

"We have an obligation to get that money back, and we will continue to pursue that until we do... We have a difficult financial position as a country and this money would help," he said.

Dutch Finance Minister Jan Kees de Jager said he would be consulting Britain about taking further steps against Iceland, but added that the matter would likely end up in court.

"I am very disappointed that the Icesave agreement did not get through. This is not good for Iceland, nor for the Netherlands.

"The time for negotiations is over. Iceland remains obliged to repay. The issue is now for the courts to decide," Mr de Jager said in a statement.

The issue will now be referred to an international court, the European Free Trade Association Surveillance Authority.

Analysis


Joe Lynam / BBC News

The Icelandic people were damned if they did and damned if they didn't.

It looks as if they still couldn't stomach the idea of paying off the debts of privately owned banks - even if the revised deal was considerably more generous.

The consequences of this referendum vote is that Iceland's years in the financial wilderness could be extended much further.

Moody's and other ratings agencies look set to downgrade the country even further, making it prohibitively more expensive to borrow on the open markets.

Iceland's bid to join the EU will be paused or even vetoed by Britain and the Netherlands. And the tiny Atlantic economy is facing legal action in the EFTA court which might force it to pay up sooner than planned and at a punitive interest rate.

Democracy doesn't pay if you're an Icelander.

Mr Sigfusson told a news conference that the dispute with Britain and the Netherlands would take at least a year to resolve in court.

"My estimate is that the process will take a year, a year and a half at least," he said. However, some analysts believe the legal process would take considerably longer.

He added that the outcome of the vote was clear. "I think it's very hard to interpret this in any other way than the fact that the Icelandic people are not prepared to accept payments or shoulder the burden unless there is a clear legal obligation to do so."

Iceland's Landsbanki bank ran savings accounts in the UK and Netherlands under the name Icesave and investors there lost 4bn euros (£3.5bn; $5.8bn).

When it collapsed in 2008, the British and Dutch governments had to reimburse 400,000 citizens - and Iceland had to decide how to repay that money.

'Such a revulsion'

Iceland's parliament had backed the deal, but President Olafur Ragnar Grimsson refused to sign it, triggering the referendum.

A previous deal, imposing a tougher repayment regime, was rejected in a March 2010 referendum by 93% of voters.

Mr Sigfusson appeared to rule out a third attempt to persuade voters to accept a repayment deal.

"I think we're getting a very clear sign from this referendum, that further negotiations are ruled out. No use in trying that again."

But in his interview with BBC News, he said: "There is not much point in being angry. We are where we are and we have to work from then on. Iceland has made considerable progress out of its difficulties in 2008."

Backers of a "yes" vote had argued the repayment deal was the best way to resolve the issue in terms of cost and risk to Iceland.

The "no" camp said the Icelandic taxpayer was under no legal obligation to pay for a private bank's losses and that the deal would put a heavy burden on the nation.

Longer period, lower interest

Under the terms of the rejected deal, Iceland would have paid the money back with 3.3% interest to the UK, and 3% to the Netherlands, over 30 years between 2016 and 2046.

Under the previous proposal, the money was to be paid back with 5.5% interest between 2016 and 2024.


Prime Minister Johanna Sigurdardottir: "Disappointing numbers" The actual cost to the state was expected to be much less than the 4bn euros owed, as the government said most of the repayment would come from selling the assets of Landsbanki.

The government has said it did not expect the cost to exceed 50bn kronur (£168m).

Analysts say a resolution of the issue is vital to Iceland's prospects for recovery because it would allow the country to return to the financial markets to fund itself.

Solving the dispute is also seen as key to Iceland's chances of joining the EU.

Iceland's three main banks collapsed within days of each other in October 2008.

The government compensated Icelandic savers, but overseas customers faced losing all of their money.

The issue sparked a diplomatic row between Iceland and the UK, and created uncertainty over Iceland's economic recovery.


http://www.bbc.co.uk/news/business-13029210