It seems the Icelandic President has in effect vetoed legislation that would hold the citizens of Iceland responsible to pay back billions of Euros to former Icelandic bank depositors in the U.K. and The Netherlands.
The Icesave deal is deeply unpopular with the Icelandic population and there is widespread feeling that taxpayers are being left to foot the bill for mistakes made by financial firms operating under the watch of other national regulators. Critics say the bill would lumber Icelanders with an extra debt burden equivalent to 40 percent of gross domestic product or $18,000 per citizen, including interest payments.
Britain and the Netherlands have veto power over Iceland's EU membership bid and could block the entry negotiations.
Since the Icelandic bank's deposit liabilities were priced in Euros, it looks like the Icelandic Government has committed the country to collectively pay almost 5 months worth of their annual output back to former foreign depositors, pending legislation. I'll bet the 250,000 voters in Iceland vote against the referendum.
13 comments:
Matt, from what website did you get this data?
Matt, please ignore my post above. This was meant for your previous post regarding the government's spending.
Joker,
It was from the Treasury's website here, from the the Daily Treasury Statement.
It seems that those 5 areas of spending are dominating Govt spending increases of late.
Resp, Matt
Why in the world would Iceland want to be part of the Eurozone anyway? Better off for them if they are frozen out.
Mike,
I agree, I think the voters there are going to vote it down (I would, like hell I would work 5 months to provide deposit insurance I never signed up for).
Anyway the powers that be are threatening to withhold supposedly critical Euro loans if they dont pay the deposits back. Iceland may have to "go it alone" then. They are resource rich in many ways from what I have read.
Does anyone know if you can make beer from seaweed? ;)
What caused Iceland's Banks to fail? Was it bad loans/regulation or was it a run on the bank? Its hard for me to understand why the ECB would allow their citizens to lose their savings when they knew the bank would have to liquidate at the worst moment of the financial crisis for asset values.
Mike, is credit expanding in the U.S. at material rate yet?
TB,
Here is a UK paper page that goes way back on the Iceland issue.
I think at the top the Iceland bank sector had assets in excess of 10x GDP (US equivalent $140T+)...over leveraged?
Brantley,
After a brief pickup in late November/early Dec, total loans and leases have resumed their decline. Total loans and leases outstanding are now at the lowest level in four years. (You can get this weekly info from my Fiscal Trend Digest.)
I think the problem with Iceland, too, is that the borrowing was in foreign currency. (Euros, GBP, CHF, etc.) Classic case of how you can get into trouble: borrow in a foreign currency.
Loans and Leases shrinking again... Perhaps Gross / El-Erian are right and this *is* the new normal de-leveraging our policy makers have been aiming for. It would be less painful to grow incomes rather than shrink debt. *sigh*
Thanks Mike......with credit destruction, not sure the Fed can spend enough to keep the jumpstart ops on track for private sector to take over.
Basil:
Yes, exactly. I mean, duh!! You'd think that idea would have crossed somebody's mind by now. And the whole notion of pushing for more credit when households still have too much debt is absurd. Get incomes up! Create jobs for people! How hard is this stuff???
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