Sigrún Davíðsdóttir's Icelog

Small or big steps?

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The Winding-up boards of the banks have been waiting to be called to a meeting with the committee overseeing the lifting of the capital controls – and now an invitation has landed on their tables for a meeting next Tuesday. Remains to be seen what the message is.

In the meantime, there is the extension of the Landsbanki bond agreement and a payment of ISK400bn to priority claimants in Landsbanki, announced yesterday, all explained here. The agreement has been changed from what it was originally but at least decisions have been taken and the Brits have had some happy tidings.

The question is if something more will follow, hen’s or horse’s steps.

Bjarni Benediktsson has heaped time pressure on himself (allegedly trying to push the PM to good deeds) by continuously referring to a plan in spe by the end of the year. With domestic politics in mind, he might feel that Icelanders need some taken care of, i.e. some control easing for domestic entities rather than foreign creditors. Without solving the problem of the offshore ISK any domestic move can be little but some window-dressing.

So far, the fundamental rift between the two government leaders hasn’t been fixed – that the PM hopes to gain funds out of lifting controls while Benediktsson is, I believe, “just” trying to lift the controls. As long as they don’t look in the same direction it is difficult to believe in the big steps necessary to lift the controls.

It certainly is a victory for Benediktsson that he has finally – after months (depends if one counts from May or later) been able to do what he apparently wanted all along: extend the Landsbanki bonds (albeit by changing the agreement but not in a materially different way). Better late than never. Incidentally, this happened on a day where he appointed a new minister of interior, Ólöf Nordal, thereby making a popular choice for everyone except his parliamentary group, which in the long time might turn problematic. The group will certainly not feel they owe him any favour.

In November a year ago when Benediktsson managed to drastically tame the PM’s wishes re the “Correction” as the plan was first presented, I thought this signaled that Benediktsson was gaining the upper hand in the relationship with his coalition party. I was dismally wrong that time; no drastic steps followed. Now that Benediktsson has taken steps re Landsbanki, after all this time, doesn’t necessarily mean he is gaining the upper hand.

The last paragraph in the press release from the Ministry of Finance is interesting:

The settlement of priority claims marks a major step forward in the winding-up proceedings of the failed banks and will assist the Government in implementing a comprehensive capital account liberalisation strategy. 

So is there now the long-awaited strategy? Not sure yet, more needs to be seen.

Another interesting new move – Heiðar Már Guðjónsson has now demanded at Reykjavík District Court that Glitnir be put into bankruptcy proceedings; another interesting twist.

Follow me on Twitter for running updates.

Written by Sigrún Davídsdóttir

December 5th, 2014 at 11:01 am

Posted in Iceland

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