Reykjavík Grapevine - 19.06.2009, Blaðsíða 31

2009Nov 13Oct 20 Nov 6Oct 15 November 4 Nov 12 Nov 14 December 23 Dec 29 January 9 Jan 23 February 24 March 31 June 8
Icelandic authori-
ties begin talks with
France, as the EU
head, about Icesave
and possible solu-
tions.
In response to Britain’s use
of an anti-terrorism law to
seize Landsbanki’s assets,
the organisation InDefence is
launched within Iceland, pro-
testing the decision, famously
employing the catch-phrase,
“We are not terrorists”.
The British government
announces it will lend
800 million pounds to
cover British Icesave
deposits. At the time
it is estimated that
300,000 Brits had a
total of 4 billion pounds
deposited into Icesave.
Landsbanki pays 600 million
Euros to the Dutch Icesave
branches. 13 Dutch municipal-
ities have a total of 59 million
Euros deposited into Icesave,
among them the Hague, which
had deposited 10 million Euros.
British depositors receive e-
mails informing them that they
can retrieve their deposits the
following week. On the 21st,
withdrawals open up again.
About 100,000 Dutch Icesave
depositors plea with their central
bank to cover their deposits. At
that time, the Dutch central bank
was able to cover up to 100,000
Euros on each account.
It is estimated that the
total amount owed from
the Icesave collapse is
640 billion krónur – at that
time, about 3 billion Euros
Dutch authorities block the sale of Icesave’s
Holland branches, which at the time are
worth between 5 to 10 million Euros. A total
of 1.6 billion Euros had been deposited into
the accounts. Ten banks had shown interest
in buying the branches. The following day,
it would be reported that 118,000 of the
144,000 Dutch with Icesave accounts had
gotten their money back.
Just before Christmas break, Icelandic
parliament votes to raise taxes, although the
Prime Minister tells reporters that no deal has
yet been reached with regards to paying off
the Icesave accounts. Then Foreign Minister
Ingibjörg Sólrún Gísladóttir tells reporters that
talks with the British and Dutch will continue
in January. Unrest within Iceland grows.
The investment and real estate
company Newcastle Building
Society lays off 150 people in
the UK due to losses incurred
in the Icesave crash.
Svavar Gestson is
appointed chair-
man of the Icesave
agreement com-
mittee.
Foreign Minister Össur Skarphéðinsson and British
Foreign Minister David Miliband engage in talks
over Icesave, both expressing confidence that a
deal will be reached. Talks continue over the com-
ing weeks between Icelandic, British and Dutch
authorities, with all sides characteristically tight-
lipped but optimistic.It comes to light that the
Icesave debacle has cost
the Dutch government 230
million Euros, 212 million of
which was used to pay back
Dutch depositors.
Geir H. Haarde resigns
as Prime Minister of Iceland.
Talks for an emergency gov-
ernment begin.
Deal reached with British and Dutch
over Icesave. The British government
will be repaid 2.3 billion pounds over
the next 15 years with an interest rate
of 5.5%. The agreement effectively
makes the money a loan to Iceland.
A UK treasury spokesman said of the
news to the AFP, “The government
welcomes Iceland’s commitment to
recognise its obligations under the EC
Deposit Guarantee Scheme to repay
depositors in Icesave.”
Then Prime Minister Geir H. Haarde announces that “there is a good chance that Lands-
banki’s assets will cover a large part of Icesave’s deposits.” At the same time, British
Finance Minister Alistair Darling says that Iceland told him that they would not cover de-
posits left by British depositors, only Icelandic ones. Haarde tries to assure people that the
Icelandic and British authorities are talking it over. Then Icelandic Finance Minister Björgvin
G. Sigurðsson tells people not to panic. Later that day, the British government evokes the
Anti-terrorism, Crime and Security Act of 2001 against Landsbanki, the Central Bank of
Iceland and the Government of Iceland in the United Kingdom. Dutch authorities contact
Iceland to get information on their own deposits, as they’re not able to withdraw, either.
the roughly 120,000 Dutch Icesave
accounts. Landsbanki would end up
paying 600 million Euros to the Dutch
Icesave branches, but this wouldn't be
enough – in January, it would come to
light that the Icesave debacle had cost
the Dutch government 230 million
Euros, 212 million of which was used to
pay back Dutch depositors.
The walls close in around Iceland
Even with pressure from Britain
and Holland, Icelandic authorities
remained non-committal to their
responsibility in the Icesave crisis.
What would ultimately change their
minds was the International Monetary
Fund (IMF). Jóhannesson explains:
“After the collapse of the banks, the
Icelandic government reached the
conclusion that assistance from the
IMF was necessary. Not only for the
money itself, but also because there was
a repeated message from other capitals
that 'We're not going to give you the
money that you need until you have the
IMF to control you'. In other words; 'We
don't trust you.' But it became clear that
IMF assistance wasn't being offered
until the Icesave issue had been solved.
And so the Icelandic government felt
it was more or less forced to accept
responsibility for the Icesave matter
Even though there has been a change in
government, this is still the view of the
government. When the Leftist-Greens
were in the opposition, they were saying
the IMF deal is bad, the Icesave deal is
bad. Now that they're in the driver's
seat, they've either realised that there is
no other option, or changed their minds
for some other reason.”
In the end, PM Geir H. Haarde and
then Foreign Minister Ingibjörg Sólrún
Gísladóttir had to face the fact that no
one was accepting their arguments
eschewing legal responsibility for the
Icesave matter. Newspaper DV reported
on the eve of November 13 that Haarde
and Gísladóttir had agreed to accept
responsibility. The agreement would be
submitted to parliament the next day.
Clearly, some sort of agreement
needed to be reached between all parties
involved. One that would ensure that
every single Icesave depositor would
have their assets covered completely,
while seeing to it that Iceland wouldn't
be bled dry in the process. And so the
negotiations began. Weeks became
months. In the intervening time,
repeated protests of thousands of
Icelanders would drive the Conservative/
Social Democrat government out of
power, resulting in the formation of
an emergency government consisting
of Social Democrats and Leftist-
Greens, a coalition that would hold
after elections in April. In February,
former minister of business and
current ambassador to Denmark Svavar
Gestsson was appointed as chair of the
Icesave negotiations committee. The
following month, celebrated magistrate
and corruption-hunter Eva Joly was
appointed as a special investigator by
the Icelandic government. Everything
seemed to be clicking along towards
a pleasant resolution. So much so
that when Foreign Minister Össur
Skarphéðinsson and British Foreign
Minister David Miliband met at the
end of March, both men expressed
confidence that a deal on Icesave would
be reached that would satisfy all parties
involved.
The deal is struck –
and people get angrier
Earlier this month, it was announced
that a deal was reached. In essence, the
British government will be repaid 2.3
billion pounds over the next 15 years
with an interest rate of 5.5%, and the
first seven years of payments will be
interest-only. The British were happy
– a UK treasury spokesperson said of
the news to the AFP, "The government
welcomes Iceland's commitment to
recognise its obligations under the EC
Deposit Guarantee Scheme to repay
depositors in Icesave." The reaction was
markedly different elsewhere.
Daniel Gros told reporters, "I think
that these interest rates create a real
danger for Iceland and I don't think it's
a good deal for the country. I don't see
any country in the world with as high
a foreign debt as Iceland after this."
Speaking with the Grapevine, Gros
added, “I believe this was essentially
the British and the Dutch saying, 'If
you want to join the EU, you're going
to agree to this deal.' I realise that there
are no morals in politics, so I don't like
to use morally-charged words such as
'extortion' to describe the arrangement,
but at the very least, the interests rates
asked of Iceland should be the same
that the British and the Dutch pay on
their foreign debts.”
The sentiment was very much the
same here in Iceland, as politicians,
lawyers, economists, and what seems
like practically everyone else with
an opinion on the matter agreeing,
especially with regards to the interest
rate.
“The responsibility will all be on
our shoulders,” Einarsson told the
Grapevine. “And especially because
of that, I think that the interest rate of
5,5% is far too high. I think the interest
rate of the Bank of England is now 0,5
% and the UK government can borrow
money abroad with 4% interest rates. It
should definitely not be more than what
the UK government is able to borrow
on itself. So they put a premium on it,
which they get.”
Einarsson did, however, emphasize
that he found it unlikely the Icelandic
taxpayer would pay for all of the debt
– by his estimates, the taxpayer will
probably not be covering more than 25%
of the Icesave repayment. It's a figure
that's been repeated by, among others,
former Landsbanki director Sigurjón
Þ. Árnason, who told RÚV earlier this
month that he believes that the banks
assets alone should cover the Icesave
debt, and therefore the Icelandic people
shouldn't have to shoulder any of the
debt themselves. But neither Árnason's
nor Einarsson's nor anyone's estimates
can either be confirmed nor denied.
Some even speculate worse scenarios.
“This will effectively strangle the
nation,” says Elíasson, “Wars have been
fought for less than this. I don't think
Icelandic politicians understand the
consequences of their actions.”
Daniel Gros agreed with much of
Elíasson’s assessment, underlining that
the deal will result in Iceland using
“most if not all of its GDP just to pay
down Icesave.”
For their part, Prime Minster
Jóhanna Sigurðardóttir and Finance
Minister Steingrímur J. Sigfússon
have tried their best to convince the
public of the task before them. “Our
opponents understand that this has
to be manageable,” Sigfússon told
reporters at a press conference shortly
after the agreement was announced.
Sigurðardóttir emphasized that she
believes the assumption is there that
the deal will be reviewed in case the
state’s debt capacity is questioned.
Even some of the parties who
stand to gain from the agreement are
unhappy with it. Gerard van Vliet, a
Dutch national who plans on suing
the Icelandic government into paying
the full amount owed by Icesave, told
the Grapevine that the deal “stinks”,
and added, “The Icelandic Parliament
should be aware that behind this first
agreement there are more obligations
to fulfil. Iceland needs creativity to get
to those solutions, without a paralyzing
financial burden. Solutions that involve
the future development of Iceland as
well as help in getting over the present
problems.”
So why would we agree to this?
Maybe because, Iceland really doesn't
have a choice.
CONTINuES ON PAGE 34
Icesave key players - by Jón Trausti Sigurðarson
Iceland
» An island in the Atlantic,
home to some 300,000 souls.
Its capital is Reykjavík.
Settled in the late 800s. An
independent nation from
settlement until 1262, when it
became a subject of Norway.
Independent again in 1944.
Had until 2003 never been
a part of military action.
Employed one troop in Iraq
before withdrawing last year.
Hit hard by the financial
fiasco of 2008. Proud home to
Björk, Skyr and schizophrenic
weather. Also not-so-proud
home of Landsbanki, whose
Icesave accounts are a
popular subject right now.
united kingdom
» Actually consists of four
countries: England, Scotland,
Wales and Northern Ireland.
Home to some 61 million
folks, give or take. Capital is
London. Known for colonizing
smaller nations (if they don't
have flags). At the height
of its power, the UK ruled a
quarter of the globe's land
surface. Its empire has since
been reduced. Pissed off at
Iceland for Icesave. Froze
all Landsbanki assets in the
UK, invoking a 2001 terrorist
attack legislation.
Netherlands
» Been around since the 16th
century. Currently home to
some 16.5 million people.
Its capital is Amsterdam.
Are known for their very tall
inhabitants, relaxed marijuana
legislation and windmills.
Also for founding New York
City. In the 17th century, the
Netherlands became the first
capitalist state in history. This
lead them to experience the
first known asset-inflation
bubble: the Tulip Mania of
1636. Thus, they should be
understanding of Iceland’s
current situation.
Landsbanki
(b.1886, d. 2008)
» The now bankrupt bank that
opened the Icesave accounts
in the UK and Netherlands.
Bought by reformed convict
Björgólfur Guðmundsson
and his son Björgólfur Thor
in 2002. The sale marked
the beginning of the father
and son’s massive (now
failed) business adventure.
At the adventure’s height,
Guðmundsson, amongst
other things, acquired
an English football team.
Landsbanki’s bankruptcy
and nationalization has left
the Icelandic government
burdened with debt.
Lehman Brothers
(b. 1850, d. 2008)
» Lehman Brothers was a
financial service firm, an
investment bank that declared
bankruptcy on September
15, 2008. The bankruptcy is
the largest one in the history
of the U.S. Lehman Bros.
operated out of New York,
with regional headquarters in
London and Tokyo. They took
heavy losses in the subprime
mortgage crisis in 2008
which, among other things,
resulted in the bank’s fall.
Upon declaring bankruptcy,
the bank moved a large part
of its assets from the regional
headquarters, causing
escalating panic in London
and Tokyo.
IMF
» The International Monetary
Fund was created in 1944 to
"to stabilize exchange rates
and assist the reconstruction
of the world's international
payment system" after WWII.
Currently 185 nations are
members of the IMF. Iceland
is the first country in Western
Europe to receive an IMF
loan, since the UK in 1976.
The IMF’s offices are in
Washington DC. Current head
of the IMF is French born
Dominique Strauss-Kahn.
“We’re used to breaking treaties with Britain. Breaking treaties is nothing new
to us. If we break this treaty with Britain, it wouldn’t be the first time, and that’s
just the plain, honest truth.”
—Guðni Thorlacius Jóhannesson
I M
F
IMF