Iceland’s voters expressed their outrage on Saturday against bankers, the government and what they saw as foreign bullying, overwhelmingly rejecting a plan to pay $5.3 billion to Britain and the Netherlands to reimburse customers of a failed Icelandic bank.
With all but 2,500 of the 143,784 votes counted, the authorities said, 93 percent voted “no” and 1.8 percent voted “yes” in the first public referendum ever held on any subject in Iceland. The remaining ballots were declared invalid.
But the referendum was more symbolic than substantive, and the Icelandic government hastened to make clear that Iceland would still pay back the money, albeit on different terms from the ones rejected.
[…]
How to repay the debt, which represents more than 40 percent of Iceland’s gross domestic product, has consumed this small, isolated nation for the last year and a half, since its banks failed, its stock market crashed and its currency collapsed.The money represents a portion of the losses incurred by more than 300,000 Dutch and British customers of Icesave, an Internet branch of the Icelandic bank Landsbanki. The bank went bankrupt in October 2008, along with 85 percent of Iceland’s banking sector. The Netherlands and the British reimbursed their citizens, and are now pushing to get the money back from Iceland.
The three countries have been fighting over the deal’s terms ever since. An agreement this fall that would have given Iceland 15 years to pay the money, at 5.5 percent interest, only narrowly passed the country’s Parliament.
But on Jan. 5, [Icelandic President] Mr. Grimsson unexpectedly refused to sign the bill into law, setting off the need for a nationwide referendum.
Seems to me the referendum was a stunt by the government to let the public vent and try to get them onside. I suspect Americans would have voted similarly had the US had a referendum on the bailouts.
@Richard
The banks were guaranteed by Iceland, they had to offer equal or better than Eu guarantees to operate in the UK and NL (typically upto around $50K/account)
The problem is that the Icelandic banks were over leveraged – or a giant Ponzi scheme depending on how charitable you wish to be. The UK/NL regulators could have looked into this a little more closely and blocked them, but politically this is a little like the UK deciding to ban Amex because the US debt is too large.
The deposits from councils, schools etc that were in the $M were not guaranteed. They will be covered by the UK/NL governments anyway – Iceland is only on the hook for about $2Bn, although if there is evidence of fraud (and there is ALWAYS evidence of fraud) then the guarantees are off and you can go after somebody for all the money (assumign you can find anyone who has it!)
@Germain
The uk didn’t use anti-terrorism laws – that was tabloid/political spin. The bill to seize assets was tacked onto the end of an international money laundering bill, the headline statement was that this bill was to stop terrorists and drug smugglers – but thats just the media spin put on all these sort of finance bills.
Yes Iceland is in a better position than Zimbabwe to recover from this – but at the moment it is screwed because nobody is going to give them credit.
Yes you have lots of natural resources, but how do you get the $$$ to buy the mining machinery, the oil to ship the product etc when at the moment Amazon wont even sell you a CD if you have an Icelandic credit card.
“they don’t even have anything to sell.”
They can always trade credits in their carbon neutral geothermal power generation.
At least their assets can’t be frozen. They already are!
The government and citizens of Iceland appear not to be legally liable for the debt, so it wasn’t rocket science for them to reject payment. The European banks are, for regulatory purposes, under the home country. Iceland met the minimum standards for setting up a national bank emergency fund. When that fund was used up Iceland is explicitly not responsible for any overages of debt.
The Icelandic government knew that the vote would fail, but appears to want to press on anyway.
You can make arguments that the population of Iceland is right or wrong, but it should be their decision to make.
I would like to add that the Icelandic FDIC is not a government identity but a privately own insurance company (owned by all the banks).
When all the banks failed this insurance company couldn’t pay out the 20.000 euros that it was suppose to insure, so either it goes bankrupt or the government quarantines a loan for paying out, making the people pay.
“A key factor in Icesave’s appeal to savers was its interest rate,….guaranteed to exceed the Bank of England Base Rate” So Icesave was an Internet bank that offered high interest rates.
Greedy Brits and Dutch looking for maximize their profits invested there instead of the their own country’s based banks. Now their governments want the 320,000 Icelanders to pay back their 340,000 citizens.? Seems Fair.
And if they don’t pay, here’s the next shoe to drop. “Although the International Monetary Fund has never explicitly linked delivery of a $4.6 billion loan to the reaching of an Icesave deal, it is committed to Iceland repaying its international debt — the months taken to reach the original Icesave deal were responsible for holding up the first tranche of IMF funds last year.” This is the classic way Britain and the Dutch have indentured third world countries since colonial times and now they are taking that model and applying it to Iceland. Fuck ’em
3 remarks:
1. Iceland did reimburse their nationals who deposited money with Icesave but did not pay foreign nationals; that is discriminatory under European regulations
2. Iceland ministers and banking authorities repeatedly assured UK and NL banking authorities that the guarantees were there, even after Icesave’s parent company was taken over by the state
3. pilgrim #40 (departed from Holland, father?)
You can’t expect a country to give money to a country that is screwing you at the same time. F yourself.
#35 Nobody, The last time I looked Bloomberg News was not a tabloid.
“The U.K. deployed anti-terror legislation to freeze Icelandic assets as uncertainty about cross border banking rules left doubts about which country should bear the cost of covering the claims.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a685sXUNswAw
Semantics aside, the UK has played very dirty with Iceland, even after Royal bank of Scotland got bailed out for Billions of Dollars by the U.S government. A bunch of hypocritical British crooks.
http://www.heraldscotland.com/rbs-will-get-billions-in-us-bail-out-of-economy-1.826927
Good for them. It shows they have more gumption than the American Congress. It also shows they know corporations are inherently amoral and should always be heavily regulated or face nasty consequences. Or that they just want revenge on the robbers who stole from them.
#41 SomeBody, don’t need to, your Mom’s here,
but thanks anyway
All this talk about credit, foreign currency and whatnot does not even begin to touch on how money even operates in this world. For all the pro-banker people here, how on earth can you explain something that’s meant to be tangible but is actually printed from thin air and then loaned to governments that must be repaid with interest? How can it be that if I (as a government) start out with no income but only my resources at hand, take on a loan in a currency which was never mine to begin with and be expected to pay it back with interest based on currency that is still the borrower’s and not mine?
How does it get repaid? With my assets. What are my assets? My country and its resources. How does one determine what is a reasonable amount of my resources to exchange for this currency that was made up by someone? Ask the bankers … they tell you how it is going to be, not the other way around.
The point being, currency should always be borne of and managed by the governments of their respective countries and NOT by bankers external to the government. By allowing Federal Reserve Banks and the fractional banking systems to be established, our governments sold not only their assets but their own and their people’s control.
Nobody, crap on all you like about how guarantees work and whatnot but the reality is that this is how countries are bought and sold. It’s the stealthy way to do it and when the stealth approach fails (as it appears to be with Iceland’s resistance), the big bullies come in and wage a war.
THAT’S reality and no economic or financial “guru” will ever admit that the monetary system is one gigantic lie to take all the toys from the kids’ sandbox and keep them all to themselves for no good reason at all other than pure greed and disrespect for their fellow humans.
@46 Pilgrim
Bloody necrofiliac