Fighting the rating agencies
Steingrimur Sigfusson Minister of Finance is in Washington for the IMF spring meeting, together with Mar Gudmundsson Governor of the Central Bank of Iceland. Today, Sigfusson was interviewed on Reuters where he expressed his view that a downgrade of Iceland’s credit ratings, now in the air after the Icesave ‘no’ in the referendum last Saturday, was wholly unjustified now that the economy was showing signs of improvement.
“If you look at the underlying strength of the Icelandic economy we are doing quite well. We are resuming economic growth, and we are through the worst crisis. We are on the way up again and a downgrade now would be strange,” Sigfusson said.
In the interview with Reuters, Sigfusson underlined his position from the day after the referendum that Iceland will pay, that the Dutch and the British Government will get their money back. Or rather, as much as comes out of the Landsbanki assets. If this is so easy and simple one wonders why Icelanders tried three times to negotiate. The answer is that it’s not that easy and simple. Icesave is about money that the Dutch and the British consider an outstanding loan and loans are paid with interests. In Icesave III, the interests were halved, compared to earlier agreements.
What the Icelandic government appears to be saying now is that it will pay as much as it can. In particular the Dutch seem piqued by this stance and are now looking at what option the Dutch Government has, i.a. within the EU, to put pressure on Iceland for something more orderly than just paying as much as the Landsbanki assets cover, with no mention of interests.
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