The Iceland referendum - that's how democracy works

[malaise]

Fuck the EU - taxpayers should not repay foreign governments when private banks collapse. Due diligence is not the responsibility of the taxpayers.

http://news.bbc.co.uk/2/hi/business/8441312.stm
<snip>
Iceland's president has announced plans to hold a referendum on the payment of compensation resulting from the collapse of the country's banks.

President Olafur Ragnar Grimmson said he would not sign a controversial bill to repay $5bn lost by UK and Dutch savers in Icesave accounts.

The government has seen strong domestic opposition to the bill.

The Landsbanki bank, which ran the Icesave accounts, collapsed at the height of the banking crisis in 2008.

The money would have gone to the UK and Dutch governments who compensated Icesave holders following the collapse.

The bill gained parliamentary approval in December, but public opposition in Iceland has grown.

On Monday, the president received a petition against it that had been signed by a quarter of the country's population.

'Constitutional crisis'

Announcing the decision to hold a referendum on the bill, President Grimmson said that the Icelandic public had the right to choose.

"It is the job of the president of Iceland to make sure the nation's will is answered," he said.

"I have decided... to take the new law to the nation. The referendum will take place as quickly as possible."
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Of course it's astonishing to the fugging BBC business reporter. taxpayers vote about their own money - what a frightening scenario!!

[Hannah Bell]

1. kr: it will be interesting to see what happens. i'd expect it to go down. but if it does,

i'd expect retribution from global finance centers.

[malaise]

2. The EU establishment boys are already threatening them

'We won't let you in unless we can rob your taxpayers after we make bad decisions'.
Get up Icelanders - Stand up for your rights. Every nail in their coffin is a victory for democracy and the people of the world.

[muriel_volestrangler]

4. The bad decisions were made by the Icelandic bankers

followed, possibly, by the British and Dutch account holders, who didn't realise that the Icelandic bankser had set up a bank that was very liekyl to fail.

[LeftishBrit]

9. Things just aren't that simple

The Icelandic banks made the main bad decisions here. Some foreign investors made the bad (in hindsight) decision of investing with them, but they were hardly responsible for the crash. It would be more accurate to say that the Icelandic bankers want not to pay for robbing many of OUR taxpayers (as well as theirs) blind.

The Icelandic Independence Party, which presided over the crisis, was staunchly *against* entering the EU, and wished to pursue free-market, pro-'enterprise' economic policies with a minimum of national or international regulation - including regulation of the banks. Due to the fallout from the crisis, they have been replaced by a more left-wing party that is seeking EU membership, but for most of the period in question it was Iceland that didn't want to join the EU, not the EU who were keeping them out.

I can also see the point of view of everyday Icelanders, who doubtless suspect that THEY'LL have to do all the paying while the bankers go scot-free as is the way of bankers in most places. But it is hardly the case that the EU are the big bad oppressors and Iceland is the totally innocent party.

[malaise]

12. Good post

Valid points - I'm supporting the taxpayer of Iceland.

[muriel_volestrangler]

3. The thing is that Landsbanki is no longer a private bank

The Icelandic government stepped in to nationalise the domestic accounts and assets.

On 7 October 2008, following the continued deterioration in the financial markets, the Financial Supervisory Authority of Iceland ("FME") used powers granted by the Icelandic Parliament with reference to Article 100 of Act. No. 161/2002, as amended, to take control of Landsbanki Islands hf ("Old Landsbanki"). Subsequently, New Landsbanki Bank hf ("New Landsbanki") was created (now “NBI hf.”) and Old Landsbanki’s domestic Icelandic deposits, as well as significant Old Landsbanki assets relating to its Icelandic operations, were transferred to it. New Landsbanki is wholly-owned by the Icelandic Government.

New Landsbanki has taken over all of Old Landsbanki’s domestic Icelandic deposits, together with significant Old Landsbanki assets that were related to its Icelandic operations, such as loans and other claims.

Old Landsbanki retains all liabilities and assets not transferred to New Landsbanki.

http://www.landsbanki.is/english/aboutlandsbanki/oldlandsbanki/

So Icelandic depositors were protected; while non-Icelandic depositors were told "tough luck, you should have realised the Icelandic bankers were dodgy". Are you saying that 'due diligence' was the responsibility of foreign depositors, but not domestic depositors?

[malaise]

5. No I'm saying that taxpayers should not be forced tobail out

banks. I'm betting that there were more taxpayers with no deposits in that bank than there were domestic depositors. Tax payers are not responsible for due diligence and they pay taxes for specific benefits - not for the IMF and foreign governments to demand after bad financial decisions have been made.

[Hannah Bell]

7. it's not about that.

A bill to return the deposits was passed by the Althingi – the world’s oldest legislature – in a knife-edge vote this week after months of wrangling, but a lack of legal clarity over responsibility continues to dog the issue and Iceland’s taxpayers are seething at the Carthaginian terms...

President Olafur Ragnar Grimsson said he will take into account a petition calling for the deal to be scrapped. A campaign led by InDefence, a grass-roots activist group, has secured almost 50,000 signatures, nearly a quarter of all adults.

The British-Dutch loan charges an interest rate of 5.5pc, deemed unpayable by critics. It raises Iceland’s public debt by 40 percentage points of GDP, pushing the total to 130pc.

The free-market government responsible for letting Iceland’s bankers run amok was forced out of power a year ago. The current Left-leaning coalition has reluctantly backed the deal as the only way for Iceland to move beyond the disastrous episode and rebuild its battered economy, but is bitterly disappointed that it could not secure gentler terms.

A report by Sweden’s Riksbank said EU rules covering Icesave were incoherent and that it was unclear whether Icelandic citizens bear the full responsiblity. It said Britain’s authorities had acted incompetently and should share some of the compensation costs.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6921818/Icelandic-revolt-upsets-Icesave-deal.html

[muriel_volestrangler]

10. I'd agree that 5.5% interest rate is excessive

Since the rate of interest set by the Bank of England has been, for most of the period since the failure, more like 0.5%. If the Icelanders would rather stay out of the EU, not get loaned money, and have foreigners regard them as a dangerous place to lend money to, it's their right as a sovereign state, but for somewhere with a small population and an unusual economy (lots of fish and geothermal power, but not much else), it looks risky.

[Buzz Clik]

6. When the banks collapse with no rescue, those with money in the banks are screwed.

It's one way to handle it, but it will be devastating for some people.

[malaise]

8. The calculation needed is whether the IMF medicine that follows

after these massive loans (to pay back people and governments who failed to do due diligence) creates way more pain and losses for everyone as opposed to those who made bad investments.

[OnlinePoker]

11. Deposit Insurance in Iceland

Iceland has a deposit insurance scheme similar to FDIC in the States. It's called the Depositors’ and Investors’ Guarantee Fund. I pulled this from their website:

The minimum deposit guarantee in Iceland equals EUR 20,887. In the event that the assets of either department of the Fund are insufficient to pay the total amount of guaranteed deposits, securities and cash in the Member Companies concerned,payments from each Department shall be divided among the claimants as follows: each claim up to EUR 20.887 shall be paid in full, and any amount in excess of that shall be paid in equal proportions depending on the extent of each Department's assets. No further claims can be made against the Fund at a later stage even if losses suffered by the claimants have not been compensated in full.

The $5 Billion lost was by UK and Dutch savers, many of them people of moderate means who got sucked in by the high interest rates the Icelandic banks were offering. They definitely should be compensated to the 20,887 Euro mark the DIGF guarantees (these deposits were covered under this scheme). The government mandated the establishment of the fund under EU directions and should (again like the FDIC) have borrowing provisions for when the fund runs out of money. It's unfortunate for the individuals caught in the collapses who rely on the interest from their investments to survive retirement, but they really aren't entitled to anything more than what's guaranteed by the DIG fund. If the UK and Dutch governments chose to compensate them beyond that level, then those governments should be on the hook for the money, not the Icelandic taxpayer.