Mums gone to Iceland....

[InsaneApache]

Well not quite but ........


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.

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.

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.

UK Treasury minister Danny Alexander said the decision was "disappointing" and the matter would go to an international court.

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 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.

Iceland's Finance Minister Steingrimur 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.

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.

Mr Alexander, Chief Secretary to the Treasury, said on the Andrew Marr programme: "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.

He added: "We have a very clear outcome of the vote. The bill was rejected by a clear majority so we proceed in accordance to that. 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."

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

So what happens if they win? Who will enforce the courts decision and how?

My breath is getting quite bated with all the excitement. :book:

[Tellos Athenaios]

Assuming the court does say cough up, it means that we won't be getting our money but Iceland will be basically branded as being a toxic/unreliable/do-not-invest-here country. Don't touch without protective gloves, etc. It's really quite stupid: Iceland was much like Ireland in that it needed foreign investors so badly, and now it basically says that it only wants to play if everyone is always nice and will pay the bills if things go wrong. So that together with the rating downgrades they already endure means their financial position will be a lot more difficult than it already is, for far longer than it otherwise would be.

[Fragony]

I don't blame them, why should they accept such a debt pp

[Tellos Athenaios]

Well because they created it? Their banks, their government, their responsibility? Anyway the real reason is because the alternative might be worse for them in the long run?

[rory_20_uk]

Argentina defaulted on repayments in the 1990's I think, and yes for a long time the markets effectively blocked them from getting more debt... But due to defaulting on payments they were able to rebuild their economy much faster and get themselves out of the mess.

IF Greece were a separate country, it might be worth accepting the Market's ire and default to get the mess sorted out once and for all. The Market is already heavily discounting their debt as this is a possibility, so they are currently getting all the pain for no gain.

I realise Argentina is a much bigger country and I believe can now gain finance on the world Market again as, frankly, there's money to be made and that's the bottom line. If things were to get bad again they might get worse faster as at that point the spectre of another default would arise.

Iceland might be better served being a pariah for a bit and sorting things out, rather than lumbering itself with debt for God knows how long.

Of course, as a Creditor I think we should go and forcibly take some assets as collateral to be on the safe side.

~:smoking:

[Viking]

So what happens if they win? Who will enforce the courts decision and how?

They have no army. To the ships.

[Jaguara]

As a North American, I am a bit confused here. Why are the state's liable at all for the failing of a privately owned bank?

Is this due to some sort of legislation that protects deposit accounts or something? I don't understand why the British & Dutch governments had to pay for the losses of the investors in a foreign bank, and I don't understand why is the government of Iceland being held liable for something done by a private institution?

Here we have CDIC (Deposit Insurance - covering up to the first $40K in an account). All of the banks operating in Canada pay into this, and the fund would pay for any failure by a bank. So the Icelandic government would not be itself liable for the losses of an Icelandic bank...unless the Government of Iceland had signed guarantees to the CDIC or something like that.

I deeply suspect I am missing something as to how the banks operate over there. Could someone clarify?

[HoreTore]

Well because they created it? Their banks, their government, their responsibility? Anyway the real reason is because the alternative might be worse for them in the long run?

It wasn't the icelanders who put their money there, was it?

People freely put money in their banks because of their own petty greed. Nobody forced them, and they are responsible for their own actions.

[InsaneApache]

It wasn't the icelanders who put their money there, was it?

People freely put money in their banks because of their own petty greed. Nobody forced them, and they are responsible for their own actions.

Agreed.

Blimey. :sweatdrop:

[Tellos Athenaios]

It wasn't the icelanders who put their money there, was it? Actually... yep it was the Icelanders who did just that. Which is why the government decided they'd bail them out in the first place but then the government decided that it was all a bit more than they'd bargained for.


People freely put money in their banks because of their own petty greed. Nobody forced them, and they are responsible for their own actions.
Eh? I should try that one with my student loan some time: nobody forced anyone to lend me money, and I took it and I am not going to pay it back? Good on me, too bad for you? Or does a debtor have a duty towards his creditor to repay the loans he voluntarily took? Or are we forgetting that you making a deposit is in fact you lending the recipient money under terms and conditions?

This referendum is basically the Icelanders saying that they don't want the responsibility for their own mismanagement and it is a cop out by their government who least of all want any responsibility whatsoever (despite the whole thing happening under their supposed supervision). It is not a debt restructuring, and it is not just a default either. I mean where is Louis with a nice tirade about irresponsible governments and the people who vote for that when you need him?

Too bad for the Icelanders but I wholly support this action to try and recover at least some of the money: if the Icelanders can't be bothered to play fair, then the UK and the Netherlands should play hard ball with them and pursue other reasonable means of extracting that money. They owe that to their peoples. :shrug:

[Subotan]

Launch the Gunboats! We'll teach those Vikings to operate wildcat banks in the North Atlantic, and lure our gullible citizens in with enticing interest-rates!

[Jaguara]

Blaming a people for the actions of an international company based in their country seems very strange to me.

I keep hearing people say "If the Icelanders don't play fair" and such. Well, the only people with a voice in a company are shareholders...blame the company, blame th shareholders, but how is an Icelander who has no connection with this bank, responsible for what this bank does?

When an American chemical company kills thousands due to corporate negligence, do we ask the American government for reparations? No, they sue the company.

Is the British government going to be on the hook for BP's damage in the Gulf? No, that is the responsibility of the company, it's management, and indirectly it's shareholders...not the British people.

Again, all of this is assuming there is not some particular legislation in the UK & Netherlands regarding the operation of banks or some insurance program (which nobody has answered me about).

[Louis VI the Fat]

Iceland voted for governments which adopted highly neoliberal financial regulation. That is, did away with all regulation.

Iceland became a financial banana republic, but because the inhabitants are blond Nordics, foreign trust remained high, which is why the Icelandic banks could operate in Britain and the Netherlands, two of the other neoliberal paradises.

The Iceland banks were refused entry to the French market for being a banana republic bank. France chose to protect her consumers against their pyramid schemes. Or, as the City of London described this French decision, because of socialist French protection.



The Iceland population loved it when they profited. Now that the chickens have come home to roost, they pass the buck on to somebody else.


I'm torn for the same reasons I have mixed feelings about Ireland. That is, I would point fingers and say 'serves you right', if only that is patently not the case and it are precisely the people who profited the least who have to carry most of the burden now. Or possibly not, as in the case of Iceland.

[Tellos Athenaios]

@Jaguara: Iceland is reneging on an agreement their government made first when it nationalised the Landsbanki. By nationalising it the government became indebted to creditors in the Netherlands and the UK directly, it's the same move private debt on the public balance game that Ireland tried to do later. Except Iceland didn't have much of a public balance to sustain that sort of haute-finance-politicking games.

Exactly the same as how the USA treasury is liable for the debt incurred by Fannie Mae & Freddy Mac.

[Fragony]

They can keep it for all I care, why should Iceland citizens cough it up. They don't have what we want from them.

[Tellos Athenaios]

I don't have money amounting to the full value of my student loan either, right now, but that doesn't mean I should not have to pay it back over the course of time. That's what debt (re)structuring is for.

[Jaguara]

I don't have money amounting to the full value of my student loan either, right now, but that doesn't mean I should not have to pay it back over the course of time. That's what debt (re)structuring is for.

You signed that loan, the people of Iceland did not.

That said, if their government had a signed guarantees for the bank, then they would be liable...but collecting is another matter. I am still unclear as to the exact nature of the obligation to the Government.

It sort of seems like if the US expected the British citizens to cough up the money for the Gulf oil spill if BP went under.