In a further twist to the Icelandic banking saga their President, Olafur Ragnar Grimsson today refused to sign the bill into law that would repay Britain £3.6 million for the collapse of Icesave. The UK and Dutch governments’ compensated their 320,000 savers in the Icelandic banks on the understanding they would get the money back from Iceland.This is only the second time since Iceland’s founding in 1944 that the president has refused vetoed a bill passed by their parliament. This situation will force a national referendum on the issue and could well undermine their own attempts to rebuild their economy and international trust.
The President has done this in response to widespread public opposition to the repayment plan that the government so narrowly (33 votes to 30) got through the legislature. It puts president and parliament at loggerheads as well as wrecking diplomatic relations with the UK and Netherlands who were left out of pocket by Icesave’s collapse. The Prime Minister, Johanna Sigurdardottir, later reaffirmed that the money would be repaid. This episode may well also affect Iceland’s attempts to join the EU.
The Icelandic government had hoped that by agreeing this repayment they could gain access to IMF loans that the UK and Netherlands had effectively locked up until their grievances were addressed.
The Icelandic public are angry with the UK because of the use of anti-terror laws to freeze Icelandic bank assets.
The last little spat we had with Iceland was over cod in three separate ‘Cod Wars’ between September 1958 and June 1976. At one stage the UK deployed twenty two frigates, seven supply ships, nine tugs and three support ships as well as aircraft against four Icelandic patrol vessels and two armed trawlers. The last ramming was conducted by HMS Falmouth against the V/s Tyr on 6th May 1976. The last Cod War ended when Iceland threatened to close its US base at Reykjavic, which was vital to the cold war effort as maritime patrol aircraft and the Integrated Undersea Surveillance System operated from there.
Iceland no longer has this particular card to play and could find itself isolated for many years to come should the people vote ‘No’ to repayment. But it would also send a message to the UK government that guaranteeing deposits in this manner may not be good policy into the future. The UK also doesn’t have as many warships now as it did back then.
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Tags: cod war, compensation to savers, economics, hms salisbury, iceland, icelandic banks, icesave, News, Politics
It was just last year that Britain finished paying off the lend/lease WW2 debt to the USA. We didn’t default. We met our side of the bargain no matter how unfair.
We must not let Iceland opt out from their obligations – if they do then every other country will have a carte blanche to default & that will be the end of the global capitalist system.
What can we do though? No more IMF money? No EEC entry?
If an individual, let alone a country, is bankrupt then how can you get blood from a stone. Not easy.
Thumb screws Leo?
Hi Leo, hope the new year is working out for you.
We could let them delay paying back, but I get the distinct feeling that the UK is scrabbling around in the dust for every penny it can get today.
Richard/Jeff
Happy new year to you all.
We were down in Cornwall for the New Year & just got back before the snow.
Regarding Iceland perhaps there is some link between Iceland & the cold spell – in years to come the conspiracy theorists will blame the snow on Iceland saying they have influenced the weather to get their revenge on the UK.
Problem of giving a debtor grace is that its hard to be kind to one but not all.
Brown panicked because of all the dumb Local Authorities, Charities and Quangos that lost their money in Iceland. A true ally would not have acted like a third rate debt collector and would have come to an ‘arrangement’
Brown is no statesman, this will leave a bad taste in British/Icelandic relations for years. As it stands we could end up getting 0p in the pound rather than an equitable 15p-20p in the pound over twenty years.
Brown is not a business man otherwise he would have understood economic reality. You cannot bankrupt a country.
My sympathies are with the British and Icelandic people, not the schmucks in the Icelandic and British Banks ,together with the previous Icelandic and current British Government.
The Icelandic President is doing what he is paid to do , represent the people of Iceland, more power to his elbow.
Yes Andrew, we need politicians to start doing what they are elected and paid to do. That is properly represent the people who elect them and pay their wages.
Believe it or not, this is the quickest route to solving the ills of society. As long as people vote selfishly and not for what they think is what other people want. (Discuss)