Debt according to the president of Iceland
In the early afternoon yesterday, Steingrimur Sigfusson Minister of Finance said on Ruv that in spite of it all, the message from Iceland was that Iceland still wanted to pay the Icesave debt and talked about the importance of this message getting through.
Later in the afternoon, the president of Iceland Olafur Ragnar Grimsson held a press conference. In his statement* he declared the Icesave referendum, which he instigated, to be a triumph of democracy, setting an example to the rest of the democratic world. Now that Icelandic voters have declared that they don’t want the Icelandic state to top up what the Landsbanki assets might not cover of the Icesave debt to the UK and the Dutch, the world should, according to the president, take notice and accept that Icelanders will pay as far as the Landsbanki assets stretch. What and how to deal with eventual outstanding debt, not to mention interest rates on the two loans, the president doesn’t say but the hint is that because this was decided by the people in a democratic way the Dutch and the British should respect this decision.
Earlier, the president thought that Icelandic bankers and businessmen had great things to teach the world. That didn’t go all that well but now Icelanders have new great things to teach the world: democracy.
The Irish and the Greeks could put this newfound example to practice. They could hold a democratic referendum, asking if the respective countries should pay their creditors. If the voters said ‘no,’ which they just might, these two countries could tell their creditors that now there was a democratic decision on behalf of the electorates – and sorry, ‘we are only going to pay as much as we want to pay.’ It couldn’t be more democratic – and consequently, it couldn’t be more right, just and fair.
*For those of you who can read Icelandic, the Icelandic version contained peptalk to the Icelandic nation on the referendum’s beneficial effect on the nation’s self-assurance. Comparing the two versions is quite interesting. In the English version, the president i.a. points out that the Icelandic position has gained support in the FT and the WSJ.
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Hello! Ive been reading your blog for a while, but not written in before. So thank you, its good and always interesting to read!
I am sure that being president is quite an important job, but in all my years in Iceland ive never met anyone that voted for him. Not that I am saying its fixed, just that no one seems to care about it! When he gets elected, it is as good as unopposed really. I fear that he will get his “powers” taken away from him soon, as he is “Using” them, never a good thing in a democracy. I dont think thats why some one elects a president (well, outside of the US anyway).
Pete
11 Apr 11 at 10:05 am
having taken a leaf out of Iceland’s book, I will be popping down to my bank to tell them that I held a vote and decided not to pay any loans over and above the value of the asset they are secured against.
This may impact my credit history, and they may not loan to me again, whilst also taking other assets to top up the outstanding funds…..
A vote ties Icelandic politicians and no one else.
andy
11 Apr 11 at 10:50 am
I had mixed feelings on reading the President’s statement. On the one hand, it is a refreshing departure from the usual boring official language ridden with clichés. On the other hand, it makes for comical readings, something rustled up quickly by an 18 year old freshman for his homework assignment after a night of drunken revelry at Austurvöllur.
Rajan P. Parrikar
11 Apr 11 at 5:15 pm
I just saw President Grimsson’s interview on Bloomberg TV and he acquitted himself rather well. The man speaks well, and has a direct answer to questions posed – which must be unnerving as hell to journalists accustomed to dodges by politicians.
Rajan P. Parrikar
11 Apr 11 at 6:21 pm
Rajan,
I have heard the Bloomberg interview and the President doesn’t do as well as you think – he keeps referring to something that has very little to do with Icesave itself, namely the residual value of Landsbanki’s assets.
At the very beginning (in 2008) an offer was made to the British and Dutch authorities which amounted to Iceland saying “There you go, take over Landsbanki and take the Icesave money from that.” The reply from the British and Dutch was a polite “No”. They pointed out that there were other claimants against the Landsbanki assets and it wasn’t a simple matter to establish that a deposit guarantee fund could jump the queue of the other claimants.
Grimsson appears to be repeating this line in the interview. In effect he is saying that the British and Dutch governments can take the money from the Landsbanki estate – but he forgets that that money is actually owned by other people. In the interview he is giving away something which is not his to give away. He is conflating the Icelandic state with the Landsbanki Resolution Committee and as we keep being told: Iceland did NOT nationalise its banks, so the government can have no say in how the Landsbanki assets are assigned to the claimants. Thus the President sounds generous but actually he has nothing to give away.
The whole situation has been made worse by the Emergency Act of 2008 which reordered the priority of the claimants – this is a highly controversial move and strong arguments can be made that it breaks a host of other laws relating to property rights and discrimination. The fact that the act is essentially retrospective makes it even worse.
The various claims against the Landsbanki estate are currently going through the courts.
Mike (UK Nordic analyst)
12 Apr 11 at 8:38 pm
[…] is an interesting comment – posted on an earlier Icelog by Mike, a UK Nordic financial analyst – on the president’s […]
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