Ray Lau - 16 January 2010 10:09 PM
Iceland may be the first Western democracy to be forced into South-American style debt-slavery. The IMF, in concert with the UK and the Netherlands, has attempted to strongarm the recently impoverished Island of 317,000 into paying over 3.6 billion pounds ($6.3bn) — $86,000 per Icelandic family — at 5.5% interest for the next generation. The money is not conventional government debt, but arises from the collapse of a private multi-national bank during the financial crisis.
Talk about biting the hand that saved you ! Let’s have a brief look at what happened :
Iceland Causes Storm Over Bank Bailout
by Terence Neilan ( Sphere ) ( Jan. 5 2010 )—
Iceland found itself at the center of a political, financial and diplomatic controversy today when the country’s president backtracked on a decision to repay $5 billion to the British and Dutch governments, which used that sum to protect domestic depositors in a failed Icelandic bank.
President Olafur Ragnar Grimsson refused to sign a bill approving the repayment that was narrowly passed by Parliament last month, saying he would instead put the issue to a national referendum. “It is the job of the president of Iceland to make sure the nation’s will is answered,” he said.
His decision follows growing domestic opposition to the bill, expressed in a petition signed by almost a quarter of the country’s 320,000 people and delivered to the president Saturday.
But no sooner had Grimsson made his televised announcement than Prime Minister Johanna Sigurdardottir issued a statement saying it was “debatable” whether Grimsson had overstepped his legal and constitutional bounds.
“Uncertainty or upheaval in the formal dealings with other countries can have unforeseen, wide-ranging and potentially damaging consequences for our society,” she said. Grimsson’s decision is seen as a potential risk to the future of Sigurdardottir’s left-of-center coalition government, which put its full support behind the payback measure.
Britain and the Netherlands were forced to act when Iceland’s banking sector collapsed in the 2008 global financial meltdown. Depositors from each country would have lost all their savings in Icesave accounts, which were run by the Reykjavik-based Landsbanki, had their governments not stepped in to reimburse them.
Iceland’s bank failures threatened the solvency of the country itself. It had to borrow billions of dollars from the International Monetary Fund, and resolving the Icesave issue was a key condition for the loans.
British diplomatic reaction was muted today, with a Treasury official saying the government would work with Iceland “to understand why this bill has not been passed.”
The Dutch, however, were more outspoken. Finance Minister Wouter Bos said “there is an obligation for Iceland to pay,” and that not signing the bill was “disappointing.”
Another diplomatic and political issue hangs over the decision, however.
Iceland has been seeking entry into the European Union, and Britain’s finance minister, Alastair Darling, warned Monday that not passing the bill “would make things much more difficult.” That was seen as a clear hint that Iceland’s bid for EU membership was at issue.
The Brussels correspondent of the British Broadcasting Corp., Dominic Hughes, said the longer-term impacts of today’s decision could be significant for both political and economic reasons.
“It’s seen as a blow to the country’s hopes of a quick entry to the European Union,” he said. “In fact, the whole debate has soured feeling in Iceland towards the EU. It also throws doubt on further aid payments to Iceland from international lenders.”
Many people in Iceland have cooled toward EU membership and oppose the bill on the ground that they are being forced to pay for the banks’ mistakes.
link
All debt needs to be repaid. Just look at what US President Obama said this week to the US banks that the US Govt saved in the GFC ... ” Now you need to repay that US$800 billion - with interest.”
That’s how it works. I think the words “strong arm” and “terrorist country” are out of place and too emotive in a reasoned debate on what is a very real problem for folk in Iceland. The resulting solutions WILL be painful - but spitting in the face of countries that tried to ‘save’ your economy hardly seems appropriate. I’m certainly grateful that I don’t live there.
RSS Feed