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Fox
Joined: 04 Mar 2009
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 Posted: Sat Mar 06, 2010 6:39 pm Post subject: What Do You Know About Icesave? |
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Article here.
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REYKJAVIK, Iceland � Still furious over the crippling aftermath of the global financial crisis, Iceland's voters on Saturday resoundingly rejected a $5.3 billion plan to pay off Britain and the Netherlands for debts spawned by the collapse of an Icelandic Internet bank, according to initial results.
Results returned from around 83,500 ballots � or more than 40 percent of the total ballots expected � counted so far showed that 93 percent of voters said "no" in the referendum, compared to just 1.5 percent who said "yes." The rest were invalid ballots.
Icelanders were deciding whether to back a plan outlining the payment of $3.5 billion to Britain and $1.8 billion to the Netherlands as compensation for funds that those governments paid to around 340,000 of their citizens who had accounts with the collapsed bank Icesave, an Icelandic Internet bank that offered high interest rates before it failed along with its parent, Landsbanki.
Many voters object to the tough terms of the deal imposed by the debtor countries, not the idea of payment itself.
"This result is no surprise," Prime Minister Johanna Sigurdardottir said. "Now we need to get on with the task in front of us, namely to finish the negotiations with the Dutch and the British."
The initial referendum results are indicative of how angry many Icelanders are as the tiny island nation struggles to recover from a deep recession. The global financial crisis wreaked political and economic havoc on Iceland, as its banks collapsed within the space of a week in October 2008 during the credit crunch and its currency, the krona, plummeted. The Icelandic government was the first to fall as a result of the meltdown.
Final results of the referendum are not available until Sunday, though they are expected to be largely in line with the results so far.
The vote could jeopardize Iceland's credit ratings, making it harder to access much-needed funding to fuel an economic recovery. Unemployment has surged since the crisis began, to about 9 percent in January, and inflation is running at about 7 percent annually, while the island's economy continues to shrink.
Icelandic authorities have recently been in talks with Britain and the Netherlands to come up with a better deal to try to avert Saturday's referendum, which was forced by the refusal of Iceland's president to agree to the so-called Icesave bill.
Last-minute talks between the three countries broke down this week, despite the debtor countries saying they offered better terms for a new deal � including a significant cut on the 5.5 percent interest rate in the original deal hammered out at the end of last year.
The British say their "best and final offer has been turned down," but Iceland's Foreign Ministry said late Saturday it remained confident a solution acceptable to all parties can be achieved.
The debt owed to Britain and the Netherlands is a small sum compared to the massive amounts spent to rescue other victims of the global meltdown � $182.5 billion was paid out to keep U.S. insurance giant American International Group Inc. alive � but many taxpayers in the country of just about 320,000 say they can't afford to pay it.
The deal would require each person to pay around $135 a month for eight years � the equivalent of a quarter of an average four-member family's salary.
Locals see the deal as an unfair result of their own government's failure to curtail the excessive spending of a handful of bank executives that led the country into its current malaise.
"I said no," said Palmar Olason, 71, at a polling station. "We should get a better deal," he said.
Britain and the Netherlands have been pushing hard for repayment and there have been fears that they will take a hard-line stance on Iceland's application to join the EU and refuse to approve the start of accession talks until an Icesave deal is signed into law.
About 1,000 Icelanders gathered to protest in downtown Reykjavik Saturday, demanding a better say in the issue. Many ordinary Icelanders resent forking out the money to compensate for losses incurred by potentially wealthier foreign investors who chased the high interest rates offered by Icesave.
There's also residual anger that Britain invoked anti-terrorist legislation to freeze the assets of Icelandic banks at the height of the crisis, prompting the worst diplomatic spat between the two countries since the Cod Wars of the 1970s over fishing rights in the North Atlantic.
President Olafur R. Grimsson tapped into the public anger and used a rarely invoked power to refuse to sign the so-called Icesave bill after it was passed by parliament in December.
Since then, opinion polls indicated that a strong majority intended to reject the plan. The Social Democrat-Left Green coalition government and the center-right opposition say the country could get better terms in negotiations with Britain and the Netherlands.
"I voted no," said Rognvaldur Hoskuldsson, a 36-year-old machine technologist, after casting his vote Saturday morning. "We have to send a message that these countries are not going to profit from this situation."
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 entire situation seems to stem to EEA regulations that Britain and the Netherlands interpret as requiring Iceland to guarantee at least the first 20,000 Euros in each foreign depositor's account, coupled with a complaint that the Icelandic governments decision to guarantee domestic accounts in their entirety being discriminatory. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Mar 06, 2010 7:40 pm Post subject: |
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The primary question the Icelandic population answered was if the average family should shoulder the financial burden created by a small group of hyper-wealthy elite. Glad to hear they said no. However, they'll pay anyways.
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| Political leaders have already moved on and are trying to negotiate a new deal with the U.K. and the Dutch, making the bill in today�s vote �obsolete,� Prime Minister Johanna Sigurdardottir said on March 4. |
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=awUQtLSVh0sQ
http://www.ibtimes.co.uk/articles/20100305/iceland-pm-plans-to-stay-on-after-icesave-vote_2.htm
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| "We will honour our obligations. To maintain anything else is highly dangerous for the economy of this country." |
http://globaleconomicanalysis.blogspot.com/2010/03/iceland-rejects-icesave-does-no-mean-no.html
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I would suggest that overriding the will of 93% of the population is under-interpreting the message. But hey, to politicians everywhere, no does not mean no, it means whatever the politician wants it to mean.
What's highly dangerous is the attitude that the wishes of 93% of the people is irrelevant. |
Fitch now lists Iceland debt as junk. Sure, that sucks. Unless Iceland decides not to borrow anymore. In that case, it means nothing. |
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Fox
Joined: 04 Mar 2009
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| Posted: Sat Mar 06, 2010 7:56 pm Post subject: |
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$135 a month for 8 years is nearly $13,000. That's a not-inconsiderable incentive to simply leave Iceland for anyone who can do it, especially when combined with the other results of the economic crisis. And as people leave, the burden on those who stay will only increase.
The population of Iceland is all ready incredibly tiny; they simply can't afford to be losing citizens over this, especially since it's the most well educated, productive, and competent citizens who will find leaving the easiest.
Iceland really needs to simply say no to this. Unfortunately its government doesn't seem to have the nerve to do so. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Apr 10, 2010 7:33 am Post subject: |
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http://news.yahoo.com/s/afp/20100407/lf_afp/icelandeconomysocialimmigration_20100407153600
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Destitute and desperate, Icelanders opt for exile
MOSFELLSBAER, Iceland (AFP) � Anna Margret Bjoernsdottir never thought she would be forced to leave her once wealthy homeland, but after 18 months of economic upheaval she has decided to join the biggest emigration wave from Iceland in more than a century.
"I just don't see any future here. There isn't going to be any future in this country for the next 20 years, everything is going backwards," lamented the 46-year-old single mother, who plans to move to Norway in June.
The former real estate agent who lost her job when Iceland's housing market disintegrated two years ago said she feared she could soon be forced out of her large house in Mosfellsbaer, some 15 kilometres (nine miles) from Reykjavik.
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Bjoernsdottir is not alone in planning to leave Iceland's economic mess behind and seek a new future abroad. Most people in Reykjavik have someone in their surroundings who has already packed their bags and left.
Emigration has rapidly picked up speed since the Atlantic island nation's economy crumbled in late 2008, dragged down by the collapse of its major banks. Last year it marked the largest exodus from the country since 1887.
In 2009, more than 10,600 people left the country of fewer than 320,000 inhabitants, according to official statistics, with 4,835 more people moving away than immigrating.
Foreign workers, mainly Poles, who since the beginning of the decade had been drawn to Iceland's financial miracle, were the first to leave.
But Icelanders like Bjoernsdottir have not been far behind, most heading to the country's still prosperous Nordic neighbours, especially Norway.
"I don't think I can offer a good future to my daughter Olavia" in Iceland, Bjoernsdottir said.
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Analysts expect Iceland's beleaguered economy to stabilise in 2010, but gross domestic product shrank 6.5 percent last year.
Other victims of Iceland's financial woes have ended up with one foot in and the other out of the country.
Svanbjoern Einarsson, a 44-year-old father of three, says he is trapped in the country due to an unsellable house that he does not want to abandon.
Instead, the engineer has chosen to work for six-week stretches in Norway's oil capital Stavanger on the western coast, with occasional one- or two-week breaks home with his family.
"It's very difficult. When I work I forget about it, but in the evening it's very tough," he said.
Long-term, however, he acknowledged his future may be in Norway, not Iceland.
Like many of their countrymen forced into exile, both Bjoernsdottir and Einarsson blame Reykjavik for their country's plight.
"I'm so angry about this government," Bjoernsdottir said.
Iceland's first ever left-wing government came to power last year after the previous right-wing administration collapsed following a wave of protests blaming it for the state of the economy.
But the current government is now under fire over a deal to pay out massive compensation to Britain and the Netherlands for costs incurred following the fall of the online bank Icesave in October 2008.
Iceland has agreed to pay out 3.9 billion euros (5.3 billion dollars) to compensate for money the two countries paid out to 340,000 of their citizens hit by the bank's collapse.
"I had great hopes when the left-wing government was elected, that they would do something against corruption and the abusive loans, but all they do is talk about Icesave," Einarsson said.
In a March 6 referendum, more than 93 percent of Icelandic voters rejected a deal to repay Britain and the Netherlands at a high interest rate. Reykjavik has since said it will try to secure a more favourable agreement.
Bjoernsdottir was among those who voted down the deal -- and says the debacle strengthened her determination to leave Iceland.
"I don't want my daughter to have to pay for this," she said. "I just have such a bad feeling about what's happening here." |
A short credit bubble can ruin everything for a long time. |
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