Iceland president forces new Icesave referendum →
reuters.com/article/2011/02/ … NU20110220
(Reuters) - Iceland’s president on Sunday triggered a referendum on an updated plan to pay $5 billion to Britain and Netherlands for debts incurred from the financial crisis, creating new uncertainty over the island’s economic recovery.
Iceland, whose economy and financial system crashed in late 2008, owes the money to Britain and the Netherlands because both countries bailed out domestic savers who lost money in online “Icesave” accounts run by a failed Icelandic bank.
It is the second time President Olafur Grimsson has vetoed an Icesave repayment bill. In the last referendum, a big majority of the country’s roughly 200,000 voters threw out an earlier payment plan, sending negotiations between the three countries back to square one and delaying economic recovery.
there is more
irishtimes.com/newspaper/fin … 31854.html
Economic crash hits Iceland more than Ireland - except on jobs
Friday, February 18, 2011
It used to be said that the difference between Ireland and Iceland was just one letter and a few months, but there is more, writes DAN O’BRIEN
TWO SMALL north Atlantic island economies. Two financial crises of historically enormous proportions. Two IMF-backed bailouts. Two peoples stunned by their reversals of fortune and fearful of what their uncertain futures hold. Ireland and Iceland have a lot in common.
But how much have their economies had in common since their bubbles burst and what acounts for the differences in performance? This column attempts to answer the first question. Next week’s column will tackle the second.
Any rigorous comparison of how the two economies have fared must consider many relevant indicators to arrive at a rounded picture. Output, employment and wealth are the most important of these.
On the most basic measure of output – gross domestic product (GDP) – both economies have experienced very similar declines over similar periods. GDP levels in the two economies peaked within three months of each other in the second half of 2007. Both reached a low point (thus far) in the second quarter of 2010. Iceland’s peak-to-trough decline in GDP was 15.1 per cent, Ireland’s slightly smaller, at 13.3 per cent.
Headline GDP, though, does not illustrate how bad the collapse has been for either economy, because of the effect of imports.
To think the best news we have is that we did not trough as bad as Iceland is depressing to say the least. The smug dipshits who put the bank guarantee in place were only too sure we would come through the global crisis better than Germany, that we knew best, that Ireland was indeed different. 2 1/2 years later and the best we have is that we are just behind Iceland, a country which got run over by the global financial markets having bet the family silver on speculation and laisse faire international banking as a foundation for the economy.
Sadder still is that Iceland has a much better chance of recovering in the medium term, will avoid loading at least some liabilities onto future generations, and has at least stood up and taken responsibility as a nation and as citizens of that nation. Ireland is still pissing around with the idea that recovery will be handed to it on a plate, still living in denial, and still refusing to take any responsibility.
[mod edit: back on topic]
Dan O’Brien - Week 2 of 2
irishtimes.com/newspaper/fin … 34892.html
Swift action can prevent bubbles from reoccurring
February 25, 2011
Dan O’Brien, Economics Editor
ECONOMICS: Benefits for Ireland of being in euro have been greater than benefits for Iceland of having its own currency
LAST WEEK this column looked at the economic catastrophes suffered by Ireland and its north Atlantic island neighbour, Iceland. Comparing the peak-to-trough changes across a range of metrics, it found Iceland has suffered more seriously than Ireland by every major measure other than employment. Of the many conclusions to be drawn and observations made from these findings, two stand out. The first relates to pre-crash developments; the second to the post-crash period.
The first conclusion is that the size of the bubbles in the two economies – rather than anything that happened when or after they burst – was the main determinant in explaining the magnitude of the two calamities.
The one area where Ireland has suffered more than Iceland is jobs – from peak to trough total employment declined by 14 per cent in Ireland, compared to 10 per cent in Iceland. Our employment shock has been worse than Iceland’s because this economy’s construction bubble was so much bigger.
One in eight people working in the Irish economy were in construction at the height of the boom. More than half of those construction jobs have since disappeared as the sector imploded. There was no sectoral bubble of the kind in Iceland, hence its less severe employment shock.
But Iceland’s banking bubble was much larger than Ireland’s, and given the centrality of the financial system to all economic activity, its implosion was the cause of the greater overall shock suffered by Iceland compared to Ireland. While Irish on-shore banks’ aggregate balance sheet grew to more than three times GDP, Iceland’s banking system reached almost 10 times GDP. When the international financial system seized up after the collapse of Lehman Brothers in September 2008, the entire edifice came down and there was nothing the government of that country could have done to prevent it, even if it wanted to.
Deep Freeze Iceland’s Economic Collapse - Philipp Bagus, David Howden →
Bagus and Howden describe how the Icelandic business community were encouraged to borrow in Japanese Yen and Swiss Francs with their attractive low interest rates. Commeth the bust, I was asked to “rescue” many of these firms. The key problem with the banks essentially owning all the bankrupt highly leveraged businesses (that were and are essentially good ocean harvesting fishing businesses, albeit loaded over the eyeballs in debt), was that they were in turn owned by the government. The government, not wanting the lifetime of fish quotas to get into the hands of a nasty foreign creditor, would not and still does not allow them to go bust. This irresponsible action on behalf of the government will ensure these zombified fish companies will continue undead for many years to come. The reality is that they need new fresh capital and the only way they can get this is for the government to let undead businesses go bust and to allow a reorganization in their management and capital structure to take place.
No one in a zillion years will buy companies with more than 30 times leverage to pre-tax earnings!
Seeing the demise of formerly solvent companies suddenly becoming insolvent with borrowing in Swiss Francs and Yen was something I would not wish upon anyone. Whilst individuals have personal responsibility for their actions, if the Icelandic State is setting the conditions so that the rational course of action is to participate in the boom, then culpability must fall, in the final analysis, with the originators of the problem: the Icelandic Central Bank.
there is more
Judge allows Tchenguiz bank claims
Wednesday March 16 2011
A High Court judge has refused to strike out claims totalling more than £1 billion brought by tycoons Vincent and Robert Tchenguiz against the failed Icelandic bank Kaupthing.
The decision was announced by Mr Justice Burton, sitting in London.
His decision means that claims by the Tchenguiz Family Trust and the Tchenguiz Discretionary Trust against the bank can continue.
The judge, who dismissed “strike out” applications by the bank, ruled that the English courts have jurisdiction to hear the actions.
Vincent Tchenguiz, who was present in court to hear the judge’s decision, said: “I am delighted that the English High Court has recognised the right of the claimants to bring their claim in England.”
independent.co.uk/news/busin … 42880.html
The Kaupthing conundrum
Wednesday, 16 March 2011
By Sean Farrell
The Serious Fraud Office has staked its reputation on the high-profile investigation into the collapse of Iceland’s biggest bank
More than two years after the collapse of Kaupthing, how much do we really know about what went on at Iceland’s biggest bank? Well, we do know that the Serious Fraud Office (SFO) has pinned its reputation to an investigation of how British savers’ money on deposit at the bank’s UK business was used.
The SFO swooped to arrest nine men last week, including Kaupthing’s former executive chairman, Sigurdur Einarsson, and its UK investment banking boss Armann Thorvaldsson.
We also know that Robert Tchenguiz, the London-based entrepreneur who is the highest-profile of those arrested, has come out fighting. He accuses the SFO of staging a publicity stunt and says he had offered to answer the agency’s questions. He is threatening legal action to seek redress for the damage done to his reputation and business.
Mr Tchenguiz’s brother Vincent was also raided by the SFO. The brothers, who built their fortunes in property investment, went public with their arrests on the day and have vowed to prove that they are innocent.
guardian.co.uk/business/2011 … thing-bank
How the banking crisis hit the ‘Tchenguiz model’ of wealth generation
Wednesday 9 March 2011
Robert Tchenguiz turned to Kaupthing in his hour of need, but the bank itself was in free fall
In the early summer of 2007 Robert Tchenguiz was sitting not just atop his 150ft yacht My Little Violet, in Monaco, but on top of the world. The property tycoon and financier had taken huge stakes in two of Britain’s largest public companies – J Sainsbury and pub group Mitchells & Butlers – and was wielding his influence to campaign for a radical strategic shakeup of these conservatively run businesses. Both firms were dancing to his tune.
These were sluggish and bloated companies, he argued, resting on billions of pounds worth of freehold properties that could be sold off and then rented back to create a leaner, more responsive business. The prize for shareholders would be huge windfalls. And it was just the message the markets wanted to hear: shares in both firms soared.
But by the autumn of 2008 things had gone badly wrong for Tchenguiz. The credit crunch had set in and the banks were in meltdown. The Icelandic Kaupthing Bank – where Tchenguiz was the biggest customer for loans – collapsed and the repercussions cost the tycoon £1bn. His sprawling portfolio of businesses, from the Yates’s wine bar chain to the Globe Pub Company, suffered badly in the recession.
guardian.co.uk/business/2011 … -kaupthing
SFO raids offices in Luxembourg over failed Icelandic bank Kaupthing
Tuesday 29 March 2011
Kaupthing’s former Luxembourg subsidiary believed to be among the premises searched
Investigators from the Serious Fraud Office have raided five offices and homes in Luxembourg as part of their investigation into failed Icelandic bank Kaupthing and its biggest client Robert Tchenguiz.
Among the properties searched is believed to be Banque Havilland, formerly part of Kaupthing’s Luxembourg subsidiary, which was acquired from administrators in September 2009 by property tycoon David Rowland, one of the largest Conservative party donors.
In a statement, Rowland’s son Jonathan, who chairs the bank, said: “The reason for this visit is not related to the activity of Banque Havilland and concerns the former Kaupthing Luxembourg and the ongoing investigations.”
It is not the first time Banque Havilland has been searched. It was raided at the request of Icelandic state prosecutors in early 2010. On that occasion the bank and more than a dozen other parties fought a battle through the Luxembourg courts to prevent documents seized being released to fraud investigators in Reykjavik. Two months ago, however, the Luxembourg supreme court threw out attempts to block their release.
bloomberg.com/news/2011-03-3 … -show.html
Iceland Central Bankers Discussed 0.25% Rate Cut, Minutes Show
Mar 30, 2011
By Omar R. Valdimarsson
Members of the Icelandic central bank’s policy board discussed cutting the benchmark interest by as much as 0.25 percentage point, according to minutes of the bank’s March 15 rate meeting, published today.
“The governor proposed that the bank’s interest rates be kept unchanged,” the minutes showed. “Four members voted in favor of the governor’s proposal, although one member would have preferred a 0.25 percentage-point cut due to indications of slightly weaker economic activity than” the bank forecast in February.
The central bank kept the benchmark seven-day collateral lending rate to 4.25 percent on March 16, ending a cycle of 15 cuts since the north Atlantic island received a $4.6 billion bailout from the International Monetary Fund in 2008.
michael-hudson.com/2011/04/will- … l-suicide/
Will Iceland Vote “No” or commit financial suicide?
April 8, 2011
By Michael Hudson
A landmark fight is occurring this Saturday, April 9. Icelanders will vote on whether to subject their economy to decades of poverty, bankruptcy and emigration of their work force. At least, that is the program supported by the existing Social Democratic-Green coalition government in urging a “Yes” vote on the Icesave bailout. Their financial surrender policy endorses the European Central Bank’s lobbying for the neoliberal deregulation that led to the real estate bubble and debt leveraging, as if it were a success story rather than the road to national debt peonage. The reality was an enormous banking fraud, an orgy of insider dealing as bank managers lent the money to themselves, leaving an empty shell – and then saying that this was all how “free markets” operate. Running into debt was commended as the way to get rich. But the price to Iceland was for housing prices to plunge 70 per cent (in a country where mortgage debtors are personally liable for their negative equity), a falling GDP, rising unemployment, defaults and foreclosures.
Britain and the Netherlands own bank oversight agencies had failed to warn about the looting going on, preferring to pay out more than $5 billion to some 340,000 of their own depositors. Iceland’s taxpayers were told to bear the cost, as virtual tribute.
The dream was the neoliberal promise that running to debt was the way to get rich. Nobody at the time anticipated that taking private (and indeed, fraudulent) bank losses onto the public balance sheet would become the theme dividing Europe over the coming year, dividing European politics and even threatening to break up the Eurozone.
To put Saturday’s vote in perspective, it is helpful to see what has occurred in the past year along remarkably similar lines throughout Europe. For starters, the year has seen a new acronym: PIIGS, for Portugal, Ireland, Italy, Greece and Spain.
reuters.com/article/2011/04/ … 8Q20110409
Icelandic voters unlikely to approve Icesave deal
REYKJAVIK | Sat Apr 9, 2011
By Anna Ringstrom and Omar Valdimarsson
(Reuters) - Icelanders began voting on Saturday whether to approve a plan to repay debts to Britain and the Netherlands with opinion polls suggesting another rejection, dampening hopes for progress in the island’s economic recovery.
The plebiscite is on an agreement to repay a $5 billion debt incurred after Britain and the Netherlands repaid depositors who had lost money in online savings accounts. The “Icesave” accounts were run by Landsbanki, one of three Icelandic banks that collapsed in 2008.
Dispute over repayment soured relations between the small North Atlantic island nation, whose economy went into deep recession amid the bank crisis, and the two other countries.
Icelandic lawmakers in February backed the repayment plan agreed with the creditors in December but the president refused to sign the bill, triggering today’s referendum.
Good on them. If that was us, adjusted pro rata for population, that would be 65-70 billion.
I take it that if they vote it down, their entry to the EU is barred?
UK would object probably - but there’s a huge discussion within Iceland about whether joining the EU is a good thing or a bad thing - so having the decision taken off the table would suit the anti-EU brigade.
euronews.net/2011/04/09/icel … therlands/
Icelanders vote on repaying UK and Netherlands
Icelanders are voting in a referendum on whether or not to pay back British and Dutch investors who lost billions of euros in the Icelandic banking collapse.
The prime minister Johanna Sigurdardottir urged voters to approve the repayments but surveys showed that was not a foregone conclusion.
‘I believe it’s important the answer is a clear “yes”,’ the premier said, ‘but it is difficult with issues like this if the result is close. So I’m hoping for a resounding “yes” but we’ll face whatever comes.’
A ‘yes’ vote could have a devastating impact on a country as small as Iceland but could please the financial markets. A ‘no’ vote would be damaging in another way, ostracising the island financially in a year that its IMF bailout expires.
If they take it down then they win on multiple fronts.
#1. Not having the public be paying for the mistakes of a radical bank.
#2. If they are not entering into the EU (at least formally!) then they will do better by the continual gifts that they will be receiving from the EU and the US through the special arrangements that they have in place.
#3. It will be a psychological kick in the teeth to the elites.
yesmagazine.org/new-economy/ … -banksters
I’m somewhat reminded however that this is all a bit like the Lisbon shenanigan.
If the elites don’t like your vote then you will be subjected to the carrot and stick fear factor treatment.
They the lemmings will turn.
At least we have lemmings in this country who turned all too easily!
Let’s see if these mini-Vikings still have some red blood in their veins.
Time for a bit of ice cool “No” on the double here to kick them corporatist facists in the teeth.
Michael Hudson takes a Europe wide review of the Icelandic vote:-
greekleftreview.wordpress.com/20 … l-suicide/