Sigrún Davíðsdóttir's Icelog

Archive for September, 2010

Political fault lines

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New political fault lines seem to have opened up in Icelandic politics. The reason only ex- PM Geir Haarde will be charged and not the three other ministers named in a recent Althing report on ministers’ responsibility for the collapse of the banks is because four social democratic MPs chose to vote for charging Haarde and against charging the other three. Consequently, only Haarde is seen by Althing to carry the political responsibility for the fate of the banks and consequently the Icelandic economy.

The Independence Party and the Left Greens are clear on the issue. The former unanimously voted against any charges. The latter were equally of one mind for the charges. The fault lines run through the social democrats, now leading a coalition government with the Left Greens. The question is if this will have any further political repercussions. The feeling among Icelandic political pundits is that this issue hasn’t left the debate and that things are a bit up in the political air.

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Written by Sigrún Davídsdóttir

September 29th, 2010 at 10:29 am

Posted in Iceland

Only Geir Haarde

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Althingi, the Icelandic parliament has just voted on whether four ministers should be brought before a special court ruling on ministerial responsibility and misdemeanour. The result is that only Geir Haarde, prime minister May 2007-Feb. 2009, will be charged. This means that the court will be convened.

The three other ex-ministers that a parliamentary commission has also pointed out as culprits – Ingibjorg Solrun Gisladottir minister of foreign affairs and leader of the social democrats, Bjorgvin Sigurdsson from the same party and minister of trade and Arni Matthiesen minister of finance, from the conservatives – will not be charged.

There will be many who find this awkward: if one leading minister failed in his job didn’t all the other ministers who were in charge of or responsible for the economy fail?

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Written by Sigrún Davídsdóttir

September 28th, 2010 at 5:59 pm

Posted in Iceland

Mafia in the energy sector

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Recently, I did a piece on a report by Europol for Spegillinn, the radio programme that I work for. Alda at the brilliant IcelandWeatherReport blogged on it, with a link to the Europol report. With energy being the ‘hot’ sector in Iceland and with Icelanders often being more than naive when it comes to dealing with foreign investors it’s a timely report. Thank you Alda for taking it up on your blog!

Those of us who stem from fishing nations know that the best fishing grounds is where current meet. The lesson from Italy is that corruption is ripe where the public and private sector meet. That’s also where the corruption in the energy sector is. Just recently, the police in Sicily arrested the ‘lord of the winds’ in the island, Vito Nicastri the man who has been setting up wind farms all over Sicily, with a little help from the state.

This is just a timely reminder of how the mafia is creeping into the ‘clean’ economy – and a reminder for everyone that organised crime is usually pretty quick in understanding where the lucrative possibilities are to be found.

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Written by Sigrún Davídsdóttir

September 23rd, 2010 at 10:56 pm

Posted in Iceland

The pain of political responsibility

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After the informative and insightful report by the Althingi Investigative Commission a parliamentary commission was to review the report, picking out things that the political class needed to ponder on and draw lessons from. The commission was also to come to conclusion if any ministers should be charged for recklessness or negligence, wilful or otherwise, in office related to the collapse of the banks. Should they or could they have done more to prevent what happened?

September 11 the MPs published their report and it unleashed a political tempest that is still raging. The commission was split regarding eventual charges against former ministers but the majority wanted to charge four ex-ministers: PM Geir Haarde and minister of finance Arni Matthiesen, both from the Independence Party and minister of foreign affairs and leader of the Social democrats Ingibjorg Solrun Gisladottir and minister of trade Bjorgvin Sigurdsson. All of them have left politics.

According to the Icelandic constitution Althingi can convene a court (based on a Danish court, ‘Landsdom’; a similar court is found in many countries) where ministers can be charged for misconduct in office.

This caused quite a fury for many different reasons. The Investigative Commission had let Gisladottir off the hook since she wasn’t directly involved with business and finance. The MPs commission came to the conclusion that she should be charged because she had been a leader in government and should have had an insight into what was going on. This came no doubt as a huge shock to her.

Last Monday evening, PM Johanna Sigurdardottir (social democrat) gave a speech where she effectively undermined the report saying that no minister should be charged. This added yet another dimension to the already tense debate and there are those who talk about a new election.

For the time being the matter still rests with Althingi but a conclusion has to be reached by Oct. 1 since that was the time Althingi set itself to settle the issue.

One of the many interesting aspects of the dispute is that Althingi set itself the task to review the report and i.a. solve the issue on ministers’ responsibility. Should the court be convened or not? Should the ministers be charged? Now that this process is about to be brought to a close it seems that Althingi is unable to close the matter. It is bucking under the weight of confronting the ministers’ responsibility and the individuals in question.

The parties directly involved in government in the years before the collapse – the Independence Party, the social democrats and the progressives – point out that none of these four ex-ministers are now in politics and shouldn’t that be enough of a punishment that they have to live with the disgrace of having failed in office? A tricky question: if someone has broken the law it’s normally not possible to escape the law just by changing track.

Others point out that those who were in power in 2006 should be prosecuted because that’s when something should have been done to tie down the banks. That has brought the names of Halldor Asgrimsson from the progressives and Independence Party leader David Oddsson into the debate.

There is anger in society towards politicians for what happened and there will no doubt be anger if Althingi is found to escape its responsibility by ducking a process it itself set in motion. Althingi finds itself resting in the proverbial place between a rock and a hard place – and the outcome is wholly unpredictable.

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Written by Sigrún Davídsdóttir

September 22nd, 2010 at 2:39 pm

Posted in Iceland

West Ham and the Olympic Stadium

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BBC News 24 has just brought the story that there were advanced talks between West Ham and the Olympic Park Legacy Company for the football club to take over the Olympic Stadium after the Olympics in 2012. This story follows an earlier one that West Ham had been just one of many interested parties but that there hadn’t been any advanced talks regarding the future of the Olympic Stadium. The fact that there had indeed been advanced talks and that West Ham had in January 2007 presented a detailed offer was presented by BBC News 24 as a failure on behalf of OPLC to come up with a credible way of turning the Stadium into a financial success story.

At that time Bjorgolfur Gudmundsson, then a major shareholder in Landsbanki (later of Icesave fame), had recently bought West Ham. Gudmundsson bought West Ham in late 2006. First however it was made to look as if Eggert Magnusson, Gudmundsson’s long time friend, was buying the club. From the beginning there were rumours that apart from his interest in football Gudmundsson had his eyes on lucrative real estate spin offs at West Ham.

Considering the fact that everything Gudmundsson touched went bankrupt or close to – think XL Leisure – it can hardly have been a bad thing that whatever deals were on the table in January 2007 for the Olympic Stadium and West Ham they didn’t take off. Certainly, Gudmundsson didn’t bankrupt West Ham but those who bought West Ham from the banks and investors who landed West Ham after Gudmundsson went bankrupt have said that the running of West Ham under Gudmundsson’s ownership was messy. Many Icelanders will sigh in relief at the thought that Gudmundsson didn’t become mixed up with the Olympic Stadium since that deal might then have been added to the huge cost born by Icelanders from Gudmundsson’s failed business ventures.

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Written by Sigrún Davídsdóttir

September 17th, 2010 at 9:20 pm

Posted in Iceland

Some clarity at last

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Today, the Icelandic Supreme Court ruled on a ‘currency basket loan’, literally a type of forex loan. Forex loans (loans tracking foreign currencies) had been deemed illegal by an Icelandic court. But it was still unclear what the interest rates should then be if not the foreign interest rates. The ruling today was that the interest rates that should then apply are, quite logically and as expected by most unbiased people, the lowest interest rates of the Icelandic Central Bank.

There are bound to be many unhappy borrowers now since some lawyers and others campaigning on behalf of heavily indebted people had been claiming that the natural interest rates for these loans should just be the 4-5% interest rates on the loans. That would have given all those who had taken out the forex loans a windfall. Life isn’t quite that great – or unfair: it would have made those who took their loans out as indexed loans the great losers.

Finance minister Steingrimur J Sigfusson said today that the outcome was as he had expected. This might mean an extra hit of ISK43bn for the banks but it’s expected that they can stomach it.

After all, it’s less than Landsbanki lent to an obscure company, Stytta, set up to save Fons, owned by Baugur’s loyal partner Palmi Haraldsson, from a margin call and other evils. In the summer of 2008 Landsbanki lent Stytta ISK50bn – a story I recently unearthed for the Icelandic radio. More on that later but according to Sigfusson the Icelandic financial system is strong enough to stomach the ISK43bn hit.

Following the ruling there will probably be a law passed by Althingi, the Icelandic parliament, to clarify the situtation. Finally some clarity – now Iceland only needs to end the Icesave saga.

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Written by Sigrún Davídsdóttir

September 16th, 2010 at 7:28 pm

Posted in Iceland

Grace and disgrace at Gramercy Park

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Last summer, anyone looking for a spectacular flat in New York and having $26,000 to pay in rent a month, had the chance to rent a flat at 50 Gramercy Park from Jon Asgeir Johannesson, of Baugur’s former fame, and his wife Ingibjorg Palmadottir. A company eventually sign the rent contract on behalf of a couple, something they must have come to regret since only a few months later they were embroiled in a bitter disagreement and court case with the landlords. A disagreement that eventually ended in court. And since Johannesson and Palmadottir have been sued in New York by Glitnir documents connected to the rental disagreement, best called the Ikea dispute since an offensive Ikea kitchen is at the heart of the dispute together with chewed chicken wings, are now on the internet making for an interesting if at time decidedly funny morning coffee read.

The couple renting suffered all sorts of hardship. They had to use one of the toilets as a kitchen because it took ages to install the kitchen. And shock and horror: when the kitchen was finally installed it was designed by Ikea designers, not really thought to be the standard in an Ian Schrager-designed property. And for those of you living with Ikea products there is a stern warning here. According to the documents the kitchen has been ‘a source of embarrassment for the Plaintiff (the renters) and the subject of remarks by guests.’ – Chose your kitchen with care or chose our friends with an even greater care?

But that wasn’t the worst. One day in July 2009 the couple were on their balcony with guests and a hail of thirty chewed chicken wings rained on them. In this way, the landlords upstairs ‘trespassed’ onto the premisses. In addition, the lodgers had to pay $500 for servicing the air conditioning and so on and on. No fun having landlords like these though we don’t know what the landlords thought of those who rented except we know they got $312,000 in an annual rent for the year starting June 2009.

On a more serious note: the Glitnir court case has opened up a highly intriguing vista on Johannesson’s affairs and there is a whole raft of documents to study. Whatever the outcome will be Glitnir’s move has been extremely valuable in throwing light on the dealings of Johannesson and the ‘cabal of businessmen’, with the aid of PwC, who robbed Glitnir, a public company, from the inside.

It’s also a fascinating thing to watch the case as a machination in a Greek tragedy – how things are set in motion and slowly one senses the direction. Take i.a. Palmi Haraldsson, still the owner of Iceland Express. Glitnir had to look on as Fons went into bankruptcy: the claims against Fons amount to ISK40bn and supposedly no assets to speak of. Yet, Haraldsson still owns Iceland Express. Its value can be difficult to establish but at least it’s a going concern. If Glitnir can get the NY court to accept that its charges are credible, that the case should be heard in New York and the case goes against the cabal Glitnir might have the chance of confiscating the real assets of Haraldsson.

There are plenty of ‘if’ and ‘maybe’ here but that’s what gives the case this creeping sense of Greek tragedy: the slow movement that just possibly spells disaster for those charged. If the case goes against Glitnir the wind up board has at least unearthed mountains of documents that could be put to use elsewhere. Documents that enlighten us all on what was really going on inside the cabal and in Icelandic business life.

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Written by Sigrún Davídsdóttir

September 16th, 2010 at 9:21 am

Posted in Iceland