Iceland Refuses To Repay Britain £2.3bn

**English Noodles** · 06-01-2010, 09:50 PM

Iceland Refuses To Repay Britain £2.3bn

12:53pm UK, Wednesday January 06, 2010
Rob Cole, Sky News
Icelanders will vote on whether Britain should be repaid £2.3bn that was lost by British savers when one of the island's banks collapsed.

Some 320,000 British and Dutch savers were hit when Icesave failed

President Olafur Ragnar Grimsson refused to sign a bill authorising the payout to Britain and the Netherlands.

The decision means the legislation will now go to a national referendum.

In an interview with Sky's Jeff Randall, Benedikt Stefansson, an adviser to the Icelandic ministry of economic affairs, said the government remained committed to fulfilling its responsibilities to British savers.

"The majority government still holds the same positions that we are going to honour of obligations

"We're trying to minimise the damage that has been done and these are obligations that have fallen on the government," he said.

No date has been announced for the poll and many Icelanders are opposed to the payout.

Mr Stefansson urged the Icelandic public to recognise the government's responsibilities to foreign savers and vote in favour of the bill.

"I hope in the context of international reactions today, I hope people will understand this referendum needs to be passed"

Britain said Iceland must meet its "obligations".

Some 320,000 British and Dutch savers were hit when the internet bank Icesave failed in 2008 after the collapse of its parent company Landsbanki.

Around 298,000 British savers collectively had £4.56bn deposited with Icesave.
The two governments moved to compensate their citizens and Iceland had in turn been due hand the cash over to the two countries.

The bill authorising the payments was passed by Iceland's parliament last month after weeks of heated debate.

But the move triggered outrage among disgruntled Icelanders who are struggling as the country's economy flounders.

Some 60,000 people - about a quarter of the country's electorate - have signed a petition protesting against the bill and calling for the issue to be put to a referendum.

"Public opinion polls indicate that the overwhelming majority of the nation is of the same opinion," the president said in a televised speech.

The Dutch government - which is owed £1.3bn - said it was "extremely disappointed" by Iceland's decision.

Only once in Iceland's 65-year history has a president refused to sign a bill into law.

Iceland Financial Crisis: Government Refuses To Repay Britain £2.3bn Lost By British Savers | Business | Sky News

**Thetyim** · 06-01-2010, 10:04 PM

The President holds his re-election prospects more important than honour and integrity.
Politicians are the same all over the world.

**Thetyim** · 06-01-2010, 10:06 PM

Originally Posted by English Noodles

Around 298,000 British savers collectively had £4.56bn deposited with Icesave.
The two governments moved to compensate their citizens

Have I read that right.?
The British government was going to pick up half the tab ?

watterinja · 06-01-2010, 10:07 PM

I read this on Mish's blog. He has a very interesting take on the matter.

Mish's Global Economic Trend Analysis: Iceland's President Effectively Tells UK "Go To Hell" - Hooray For Iceland

Why should the tiny population of Iceland have to pay for this high-risk undertaking? The investors simply over-extended themselves.

**Spin** · 06-01-2010, 10:47 PM

Originally Posted by watterinja

this high-risk undertaking?

What high risk?

Icesave was an internet bank offering cash deposits at competitive market rates. Ordinary people had accounts there including myself (money withdrawn before it blew up).

At the end of the day, Iceland can refuse to pay, but it cuts itself off from the financial world in doing so. A pariah, with nowhere to turn when things eventually turn to shit, due to nobody doing any business with them.

**Spin** · 06-01-2010, 10:51 PM

Originally Posted by Thetyim

The British government was going to pick up half the tab ?

Yes, they stepped in and paid those who lost money, albeit with cash that was spewing off the printing machines at the time.

**dirtydog** · 06-01-2010, 10:52 PM

^Should imagine it was only dodgy Brits that needed to hide their money from the taxman or the law that put their money there

**Thetyim** · 06-01-2010, 11:00 PM

Originally Posted by Spin

Ordinary people had accounts there including myself

Was any compensation scheme in effect when you opened the account ?

**Jet Gorgon** · 06-01-2010, 11:14 PM

^ Must have been a minimum guarantee?
This happened in Alberta many years ago, when some small S&Ls offered higher rates. Folk jumped in to make a few extra bucks and ended up losing their whole deposits. As noted by the blogger in Watt's post, folks should have known it was higher risk. Tough titty said the kitty.

You play, you pay. Next they'll be bailing out folks who lost in the stock markets. Or did that happen already?

**Spin** · 06-01-2010, 11:15 PM

^^ I really cant remember, it was 2004 when savings were getting about 6%. The good old days.

The uk gov covered folks losses with funds from the Financial Services Compensation Scheme (FSCS). The government also initiated several economic sanctions against Iceland that included freezing bank accounts of many Icelandic companies operating in the UK.
If Iceland thinks it cam come out of this having gotten the better of the uk, they are well mistaken.

**Moonraker** · 06-01-2010, 11:20 PM

It's not going to comfort international investors for the future a great deal is it?

**wefearourdespot** · 06-01-2010, 11:22 PM

Had this happened when Margareth was PM , we'd seen sea harriers bombing Reykjavik. But with that Gordon shit in charge, what can we expect ?

watterinja · 06-01-2010, 11:36 PM

Depositer beware...

You must check what coverage you bank has in case of failure, before depositing your funds with them... period.

**BigRed** · 06-01-2010, 11:46 PM

Originally Posted by dirtydog

Should imagine it was only dodgy Brits that needed to hide their money from the taxman or the law that put their money there

I think most of it was invested by local councils.

As I understand it, the money was in fixed interest deposit accounts, not dodgy investment accounts. You have a right to expect some protection with the former.

**meepho** · 07-01-2010, 12:50 AM

Iceland will pay, this is electioneering by the wrong person at the wrong time.
They will be given a time scale of 14 years to pay back, with interest of course.

Holland and the UK would block membership of the EU, and block any loans from the imf, therefor rendering Iceland a sinkimg ship with no buoyancy aids.

**larvidchr** · 07-01-2010, 01:48 AM

I dont understand why the Iceland population have to compensate Foreign investors losses in an icelandic Bank ??, the Iceland population had nothing to do with that, the investors normally would have to seek compensation from the Bank through the courts if any wrong doing can be proven, has any such court case been tried??

The British investors did not seek the advise of the British government when they sent their money overseas it was a wholly private affair/decision by councils, so this has in fact nothing to do with the British Government and is outside the responsibility of the Government, why the British government have taken this upon it self is a bit strange??

Lots of people from around the world have lost their British investments in this crisis are the British taxpayer going to pay that money back.

Could it be the through many years difficult diplomatic relations between Britain and Iceland that plays a role here and big Britain seizes a chance to bully quite unreasonable terms on a very small almost defenceless nation to also score cheap domestic points in the electorate.

If I was a normal Icelandic citizen I would have very much difficulty in understanding how the losses of some foreign private investors in on of our Banks possibly could end up on my table, and I would quite frankly refuse to pay come hell or high water.

**ch1ldofthemoon** · 07-01-2010, 01:58 AM

remember the cod wars....now it`s payback.

**Spin** · 07-01-2010, 03:18 AM

Originally Posted by larvidchr

The British investors did not seek the advise of the British government when they sent their money overseas

I never sent any money overseas. My initial account funding transfer went to Icesave in the UK.

Icesave were part of Icelandic institution Landsbanki, who were nationalised as a result of the crash and that's why Icelandic citizens are on the hook.

Same as USA with AIG, same as UK with Lloyds...etc etc etc.

**Jet Gorgon** · 07-01-2010, 03:36 AM

^ I knew several gentry folks who lost almost all with Lloyds...

**meepho** · 07-01-2010, 04:33 AM

[quote=larvidchr;1282376]I dont understand why the Iceland population have to compensate Foreign investors losses in an icelandic Bank ??, the Iceland population had nothing to do with that, the investors normally would have to seek compensation from the Bank through the courts if any wrong doing can be proven, has any such court case been tried??

The British investors did not seek the advise of the British government when they sent their money overseas it was a wholly private affair/decision by councils, so this has in fact nothing to do with the British Government and is outside the responsibility of the Government, why the British government have taken this upon it self is a bit strange??

Lots of people from around the world have lost their British investments in this crisis are the British taxpayer going to pay that money back.

I agree with you 100%, you make an investment for higher returns, then risk is invoilved.
However, after the initial collapse nobody was guarateed anything for a number of weeks.

The dutch , brits and iceland sat down and came to an agreement, so the birts bailed out the brits and the dutch bailed out the dutch, [ with tax payers money of course ].
We have interferring leaders that try so hard to look good, now this has shown them up for what they are.

In the current climate the dutch and british will not let this go, and will see iceland bankrupt before loosing face. imo

crocodilexp · 07-01-2010, 04:50 AM

Originally Posted by Moonraker

It's not going to comfort international investors for the future a great deal is it?

International investors have the memory of a hare. Offer them 6% interest on savings (with some nominal guarantees), and they'll be flocking back to deposit money in Iceland's banks tomorrow.

Just look at all the companies investing in Russia in spite of the fact that they have no credibility whatsoever and the rule of law amounts to "the oligarch closer to Putin takes it all".

**wefearourdespot** · 07-01-2010, 09:35 AM

Originally Posted by larvidchr

I dont understand why the Iceland population have to compensate Foreign investors losses in an icelandic Bank ??

Because the Iceland population had 100% guarantee on their savings with that bank.
So now they have two choices:
1) They pay back 100% also to the foreign depositors of that bank (note this will leave all bondholders with a zero recovery anyway)
2) They de-nationalize the bank, get their own deposits frozen as well, liquidate the bank assets and get the resulting recovery rate together with foreign depositors.
That local depositors get 100% while foreigners get nothing is plain unacceptable.
If the UK PM had some balls, he would send the commandoes to kidnap all fuckable Icelander women and make them work in Soho brothels until the debt is paid back.

**tuktukdriver** · 07-01-2010, 10:19 AM

Originally Posted by watterinja

Depositer beware...

You must check what coverage you bank has in case of failure, before depositing your funds with them... period.

I was just about to post the same thing, you saved me the effort.

**Bower** · 07-01-2010, 10:47 PM

Originally Posted by Jet Gorgon

^ I knew several gentry folks who lost almost all with Lloyds...

If you mean Lloyds as in insurers, that was just another case of pure greed, re-insuring each other.

Lloyds Banking Group's customers have lost nothing. I have many thousands of shares in LBG was worth £7.40 per share to-day 52p. Thats how clever i am so dont listen to a word i post!

**Slipstream** · 08-01-2010, 12:37 AM

He doesn't pay and it scuppers his skint little nations chances of joining the eu. Up to him really.
I suppose the UK can just freeze some more of their assets like they did last year using the all-encompassing 'anti-terror' laws

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