ESA, the Efta Surveillance Authority, has sent a letter of formal notice to Iceland. According to ESA, Iceland is obliged to ensure payment of the minimum compensation to Icesave depositors in the UK and the Netherlands. The letter, in all 15 pages, clarifies ESA standing on these vital issues. ESA monitors non-EU members of the European internal market.
Earlier, the Icelandic Government had argued in a letter to ESA that setting up a guarantee scheme had been enough to fulfill its obligations under the EU Directive on deposit guarantees. Hence, the government seems to be of the opinion that having very little funds in the guarantee scheme didn’t matter; it was enough to set up the scheme. ESA points out that the aim of having a guarantee scheme is to guarantee 20.000 EUR, not just setting up the scheme.
The Icelandic government had also argued that that the Directive might not be applicable if deposits are unavailable because of a major and general banking crisis. ESA argues that this is clearly not the case. – Consequently, ESA counters Iceland principal arguments, actually shreds them to pieces.
More ominously, the letter warns that the Icelandic so-called ‘emergency law’, passed Oct. 6 2008, that declared that Iceland guaranteed all deposits in Iceland but not in foreign branches, runs counter to EU principles of non-discrimination. ESA points out that it’s possible to make exceptions for particular types of deposits but that Iceland didn’t make any use of these possible opt-outs.
ESA points out that since negotiations are ongoing between Iceland, the UK and the Netherlands nothing further will be done for the time being. If however the dispute isn’t resolved the case might be brought to the Efta Court.
Is this good news for Iceland? Hardly – it shreds Iceland’s arguments for not paying the Icesave bill. The official Icelandic stance has been somewhat schizophrenic: that it needn’t pay but was going to, if the right terms were offered. It will be painful to swallow but the Icesave bill is really the price paid for the past sins of omission, omitting to fetter the banks but dreaming of Wall Street on the Atlantic.
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