Iceland Is Sacrificed to Save EU: Shame on Britain and Holland

From the desk of Hjörtur J. Guðmundsson on Sat, 2009-12-05 10:10

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The European Union, in order to save itself from the faults of its own legislation, has decided that Iceland and the Icelandic people are expendable. Realising its own failures the EU has decided, through the British and Dutch governments, that the Icelandic authorities have to shoulder the responsibility which is rightfully the EU regulators’. This is what the so-called Icesave dispute is mainly about.

The dispute started in October 2008 when almost the entire Icelandic banking system collapsed. One of the three largest Icelandic banks, Landsbanki, had operated internet savings accounts in the United Kingdom and the Netherlands collecting large amounts of deposits by offering high interest rates. These accounts were operated with the approval of the British and Dutch authorities and their operation was made possible by EU laws.

Immediately after Landsbanki had collapsed and subsequently been taken over by the Icelandic authorities, the British and Dutch governments insisted that Icelandic state was responsible for the Icesave savings accounts. Therefore the two governments demanded that Iceland and its population of only 300,000 people compensate the billions of euros in lost savings plus interests in the UK and the Netherlands.

Responding to the demands from the British and Dutch authorities the Icelandic government in turn announced it would certainly honour its obligations but insisted that it was not clear what these obligations were exactly. The matter should therefore be resolved by a neutral court. The British and Dutch governments, however, dismissed this and instead insisted that the issue would be resolved politically and not legally.

Systemic crisis

The EU legislation in question is Directive 94/19/EC on deposit guarantee schemes which was implemented into Icelandic laws in 1999 according to the EEA Agreement between the EU and EFTA which Iceland is a member of. According to the regulation a privately run Guarantee Fund is to be operated in each country which is supposed to guarantee a minimum compensation to depositors of 20,000 euros for each account.

However, the directive does not anticipate a systemic crisis as undoubtedly occurred in Iceland in October 2008 but only a failure of a single bank. In other words there is simply no legislation in force which covers the situation that emerged in Iceland last autumn. Moreover, it should be kept in mind that the Icelandic financial sector is more or less regulated by the EU through the previously mentioned EEA Agreement.

These shortcomings of Directive 94/19/EC have been known for a long time and have on a number of occasions in recent years been recognised publicly by leading figures in the EU. This was for example mentioned in a report by the French Central Bank published in 2000 on deposits guarantee schemes which states that it is “accepted” that such schemes “are neither meant nor able to deal with systemic banking crises”.

Perhaps the most recent example of such admittance occurred on March 3 this year when the Dutch Finance Minister, Wouter Bos, said in a speech: “First and foremost, European countries need to take a close look at how the deposit guarantee scheme is organised. It was not designed to deal with a systemic crisis but with the collapse of a single bank.“ Nevertheless Bos is insisting that the scheme be applied to the Icelandic systemic crisis.

No state guarantee

Since the EU’s deposit guarantee scheme is not supposed to handle systemic crises but only the collapse of a single bank the Guarantee Fund in each country is privately run by the domestic financial institutions which are obliged to contribute a certain minimum amount of capital to it according to the range of their deposits. The individual state’s sole responsibility under the scheme is merely to see to it through legislation that such fund is established.

There is as a result no mention of a state guarantees in Directive 94/19/EC (Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes) for the obligations of the Guarantee Funds should they under any circumstances fail to fullfill them towards depositors. On the contrary the directive clearly states that the deposit guarantee scheme „must not consist of a guarantee granted to a credit institution by a Member State itself or by any of its local or regional authorities“.

Granting state guarantees for the Guarantee Funds in any form therefore quite simply violates EU laws. The idea behind this is that banks should not be discriminated whether they are from large or small countries. Nevertheless since the collapse of the Icelandic banks in October 2008 the British and Dutch governments have insisted that the Icelandic state is responsible for the Icelandic Guarantee Fund meeting its obligations.

Furthermore, despite the fact that no state guarantee for Guarantee Funds exists under the EU’s deposit guarantee scheme, the British and Dutch governments have been bullying the Icelandic authorities to accept that such a guarantee is nevertheless in place as mentioned earlier. They have demanded that Iceland passed laws granting such a state guarantee which alone is a proof enough that no such guarantee previously existed.

Iceland sacrificed

Leading EU people have recently admitted that at the beginning of October 2008 – at the same time when the Icelandic banks collapsed – the banking sector within the EU was facing serious collapses as well. This explains why Brussels decided that the Icelandic people should be forced to take responsibility for the faults in the EU laws. The EU simply could not admit in public that deposits in its banks were not guaranteed in the event of a collapse.

“We were a couple of days away from a complete catastrophe which would have been ten times worse than the current situation. The risk of a collapse in the European banking system was high,” admitted Finland’s Finance Minister, Jyrki Katainen, in an interview with the Finnish newspaper Savon Sanomat on September 8, 2009. The decision to sacrifice Iceland probably contributed to saving the EU banking system at the last minute.

Last summer Ingibjörg Sólrún Gísladóttir, who was Iceland’s Foreign Minister at the time when the Icelandic banks fell, said that “the main reason why it was not possible to take the matter to the courts was because there could not be any doubt that deposits were guaranteed. If it would have been agreed to get a court ruling it would have created a legal uncertainty whether there were any deposits guarantees.”

Gísladóttir said that such uncertainty would have given depositors in Spain, France or elsewhere a reason to doubt the guarantees and withdraw their savings. In other words that there would be run on EU banks. So in other words Iceland and the Icelandic people were simply sacrificed to save the EU banking system from collapses as a result of a flawed EU legislation which they are not at all responsible for.

Conclusion

The behavior by the British and Dutch governments towards Iceland is simply disgraceful. They have used the economic crisis Iceland is currently facing to try to suppress it. They are threatening to blockade Iceland’s possibilities to get loans from abroad if their outmost demands are not being met. They have also used their influence within e.g. the International Monetary Fund (IMF) to threaten the Icelandic government.

The British government even used controversial anti-terrorist legislation to freeze Icelandic assets in the UK after the Icelandic banks fell. Even assets owned by the Icelandic state which must be regarded as a direct attack on Iceland. The British government then put Iceland on a list with terrorist organisations such as Al-Qaida. And this they have done to a NATO ally. With allies like this Iceland obviously needs no enemies.

The question is who is responsible for EU legislation? Should a legislation formed and put into force by the European Union turn out to be a failure, who is responsible? It seems Iceland is! The EU simply has to recognise publicly its responsibility for the faults in its legislation and that the Icelandic people are not responsible for them. The Icesave dispute then needs to be solved in a civilised manner and not with larger countries bullying a small one.

The civilised way is to find a solution everyone can live with through a common agreement but not by the means of threats and oppression as has been the case until now. If such a solution cannot be found the only way is to take the dispute to a neutral court. Iceland has always maintained that it wants to honour its obligations regarding deposits but added that it first needs to be clarified which exactly these obligations are.

To H.J. Guðmundsson from Kapt. Andre

Submitted by Kapitein Andre on Thu, 2009-12-10 18:48.

I had been patiently waiting for other Brussels Journal commentators to enter the fray.  Alas, only Gathafi’s comfort boy shows any interest.  In addition to being off-topic and lacking a thorough knowledge of the war, his English certainly leaves something to be desired i.e. “pot of flesh”.  I understand your need for online interaction, but I caution you to choose your blog buddies wisely.

 

The Icelandic government may have a viable EFTA case.  However, Iceland desperately needs ECB and IMF loans, and neither Den Haag nor London is prepared to allow Iceland to receive these funds while the Icesave dispute languishes in the courts.  Your article and subsequent comments have precious little to do with building a viable legal case; on the contrary, you are taking the dispute to the court of public opinion, and playing to Euro-sceptic sentiments.   That put your article on my radar :)

 

I have elucidated my position on the Icesave dispute in prior comments, and see no further point in repeating myself.  I appreciate your corrections in terms of loan agreements vs. loans received, as the available information is rather ambiguous in that regard.

 

The “out-vasion” is over.  It is time for Icelanders to accept responsibility for the detrimental actions of their banks, which were championed until the end.   Now the former “Vikings” (apparently not a pejorative term in Iceland) are at the mercy of foreign brigands and conquerors; a modern-day “Darien Scheme” gone horribly wrong.

 

Iceland may be in the North Atlantic for now.  But if it doesn’t make nice with the EU, it will have to find alternate sources of financing, and risk being towed to the Barents Sea and anchored off Murmansk.  Will this be poetic justice?  After all, the Norse did found Rus.

@ Kapitein Andre

Submitted by traveller on Fri, 2009-12-11 10:59.

Lacking a thorough knowledge of the war...
Pray tell me which were the other fighting nations against the nazis?

To Kapitein Andre

Submitted by Hjörtur J. Guðmundsson on Thu, 2009-12-10 21:31.

First I would like to thank you for finially agreeing with me. That the British and Dutch governments have no legal case and therefore are trying as bigger countries to use the difficulties Iceland is facing in its economy at the moment to get it to do as they want. That is exactly the point in my article. Furthermore you obviously think it is completely acceptable that bigger countries bully smaller ones. Interesting.

Regarding loans necessary for Iceland it has actually turned out that we need much less loans than previously thought. We will probably need at most only a part of the IMF loan (some claim we don't need it at all) and definitely not the ECB loan or the Russian one. And if we will be fortunate enough to reject the attempted suppression from the British and Dutch governments we won't need the loans from them either.

@ Kapitein Andre

Submitted by traveller on Thu, 2009-12-10 19:27.

Because the Icelanders are starving for credit while their case would be in court they should accept the UK and Dutch "orders"? That's called blackmail and bullying, which is definitely not the first time in English and Dutch history towards smaller or backward nations.
Yes it is a pound of flesh and yes I made a mistake but it doesn't change the meaning of anything I wrote.

Lipstick on a Pig - A North Sea Pig

Submitted by Kapitein Andre on Wed, 2009-12-09 00:09.

Hjörtur Guðmundsson,

 

There is a very fine line between ensuring one’s survival and evading responsibilities, and unfortunately, Iceland’s actions place it in the latter camp.  Iceland’s refusal to compensate foreign retail banking creditors whilst insuring its own to a high threshold, refusal to liquidate Landsbanki’s Anglo-Dutch assets to compensate Anglo-Dutch creditors, attempts to secure Anglo-Dutch, ECB and IMF loans without resolving the “Icesave dispute”, and reneging on payment arrangements following the receipt of loan are telling in this regard.  All this, as the EU president and member states made it perfectly clear that resolution of this dispute was a prerequisite for aid.  The Icelandic parliament clearly had no qualms accepting foreign loans, merely about repaying them.  That pig doesn’t fly.

 

As I noted, the British and Dutch governments divined that Iceland’s intent was to receive the loans it needed whilst delaying the Icesave dispute indefinitely via the EFTA.  Fortunately, they headed Iceland off at the pass.  You will note that the Province of Noord-Holland was preparing litigation against Iceland to seize various Landsbanki assets until a royal decree halted the proceedings.  Why?  Because Den Haag wanted to resolve the dispute before it became adversarial.  So much for that…

 

Traveller,

 

I am afraid that I can no longer continue our correspondence.  Your mental impairment is such that I must sever our blogging relationship in order that you seek psychiatric and educational help.

 

Frank Lee,

 

You are a more severe critic than I.  I would not call Icelanders parasites.  They are one of Europe’s micro-nations, and one that has been irrelevant for centuries; the island’s strategic importance has been over-stated for decades.  Similarly, one visits modern Luxembourg and wonders what all the fuss was about when it was given independence.

 

If Iceland truly took part in any wars since the medieval era, then it is the Cod Wars.  However, as Traveller would have it, Iceland’s fishing waters will soon be the driving force behind the global economy in the 21st Century.

 

To Kapitein Andre

Submitted by Hjörtur J. Guðmundsson on Wed, 2009-12-09 01:05.

First of all the Icelandic government decided to announce that all deposits in banks in Iceland were secure when the banks collapsed a year ago. This was meant to secure the stability of the Icelandic economy and prevent its total collapse (as I have told you before). The actions regarding Landsbanki assets were also part of this attempt. All this is provided for in the EEA agreement.

Secondly, since when is it not all right to ask for loans? What exactly is the crime? If the one you ask is not willing to loan you he simply says no.

Thirdly, Iceland has not renegated on any payment arrangements following the receipt of loan. If you are talking about the Anglo-Dutch loan Iceland has not yet received that loan or accepted it. Regarding the loans from the IMF the IMF people have repeatedly said solving the Icesave dispute is not a condition for those loans.

And again, I would like an answer to my question. If what you have said is true and if the Dutch and British government have such a good case against Iceland as you seem to think, then why have they repeatedly refused to take this dispute to the courts?? The answer is of course quite simple, they know they would loose!

P.s. Iceland is not in the North Sea but the North Atlantic. It seems you desperatly need to refresh your geographical knowledge as well as your knowledge of this Icesave issue ;)

@ Hjörtur

Submitted by traveller on Thu, 2009-12-10 09:48.

Kapitein Andre has the habit of never answering concrete questions with concrete aanswers, he always goes off on a different tangent.

Now for the blood ands tears of WWII.

The only fighting nations of that war against nazism were:
Poland, Belgium, Serbia(not Croatia), England and the US. Russia changed sides after being attacked themselves but first took their pot of flesh from Poland in cahoots with the Germans.
France was not fighting, they were running like chickens without a head. Immediately afterwards they joined the nazis through the Vichy government.
This was done with the majority of the population's consent and to make matters worse they elected a Vichy president when every Frenchman knew the truth already: Mitterand.
Iceland was not attacked by the Germans and that little country should have attacked the Germans??? With their fishing fleet???

Let Iceland stay independent and free and don't join the EU monster, it's not going to last anyway.

I was joking!

Submitted by Frank Lee on Tue, 2009-12-08 20:41.

Kaptein Andre,

Believe me, I was being sarcastic about the Icelanders.  I have very little sympathy for parasites who have benefited so greatly from the sacrifices of others, but who now expect others to sacrifice on their behalf.  May they sink into a poverty of their own making.

To Frank

Submitted by Hjörtur J. Guðmundsson on Tue, 2009-12-08 22:12.

I thought it was quite obvious to everyone that you were not serious. But anyway, I suppose very few countries in history have actually sacrificed themselves for other countries without having their own interests in doing so. Generally they don't.

What do you think about Sweden and Switzerland and their neutrality? What do you think about neutrality in general? Not much I guess. Iceland was simply one of many countries that were neutral, or wished to be neutral, during the Second World War. However, many countries simply were forced to defend themselves from the Nazis who simply did not repect their neutralitly. Otherwise they would probably have stayed neutral.

Iceland was occupied by the British on May 10, 1940. In other words our neutrality was violated although having the British over was naturally much more pleasant. Then in 1941 the Icelandic government asked the Americans to defend the country after the British had requested that since they needed their troops badly elsewhere but did not want Iceland to fall to the Germans.

After the war Iceland joined NATO, was a founding member. In other words we sided with the Americans and the other western powers against the Russians. Joining NATO was certainly controversial in Iceland as probably in a number of other countries that joined up. Since we had no military NATO requested land for a military base in Iceland which was granted and which served an important role during the cold war, especially in detecting Russian subs on their way to American and Western European waters.

Regarding the war on terror Iceland supported the invasion in Iraq although that was also very controversial. Icelanders have been sent both to Iraq and Afghanistan to serve there, mainly civil units such as medical staff, fire fighters and air traffic operators but also people who have engaged in military operations.

It may be true we haven't shed much blood for others but it is nevertheless not true that we have just stood on the sideline if that is what you are saying.

KA Responses RE: Iceland

Submitted by Kapitein Andre on Tue, 2009-12-08 17:38.

Traveller,

 

Permit me to congratulate you on your “progress”.  From advocating for Libya, you are now an advocate for a Western liberal democracy.  Unfortunately, your new advocacy suffers from the same irrational refusal to deal with objective facts and tendency to blame the Western powers for a government’s failings.

 

Marc Frans,

 

Whether or not the Wall Street investment banks benefitting from TARP had “run amok” by leveraging and speculating to the hilt, was a deciding factor in the public’s decision to support or oppose TARP; essentially, the question one of moral worthiness.  As Mr Guðmundsson is determined to portray Iceland as the victim in the Icesave dispute so as to garner sympathy and cause indignation at Brussels, Den Haag and London, I applied the same criteria.  All banks have the same goals, but not all were as reckless as Iceland’s banks.

 

Hjörtur Guðmundsson,

 

Thanks for your reply.  As I noted, the Icelandic authorities thought it perfectly fine to leave Landsbanki’s British retail clients out to dry, and yet began screaming bloody murder when London turned an eye to the bank’s assets in the UK.  No, Iceland is not “innocent” at all.  Nor has it acted in good faith to find a solution; after accepting Anglo-Dutch loans, Iceland’s parliament then limited payment on these.  Iceland even had the gall to seek ECB and IMF financing whilst breaking the negotiated agreement with the Netherlands and UK.  Iceland is determined to delay resolution indefinitely so long as it has access to emergency financing; fortunately, its former “partners” (clients would be more appropriate!) went for the jugular.  I am certain that Icelandic cod, renewable energy and new relationships with the BRIC economies will make it the independent wonder of the North Sea…(eyes roll)

 

Frank Lee,

 

I fail to appreciate Iceland’s major contribution to the Second World War, Cold War or War on Terror.  Iceland was in union with Denmark and therefore took the latter’s neutral policy with regard to the Third Reich, until the Allies occupied the island in 1940.  Icelanders were far from enthusiastic about NATO membership or the subsequent defense agreement with the United States, which based forces on the island until 2006.  Lastly, I am at a complete loss as to how to respond to your very mistaken assertion that Iceland made “painful sacrifices” and “shed blood” during the War on Terror.

@ Kapitein Andre

Submitted by traveller on Tue, 2009-12-08 19:24.

You have the habit of commenting about things you don't know anything but a few things about.
The whole of Europe tries to fish in Icelandic waters until there was nearly a war between Iceland and the UK.
The people from Iceland don't really know the riches they have on their territory, their abundant cheap energy is a goldmine for the near future if the right partners are attracted and those are NOT Europeans, that cuddled pampered lot doesn't know how to go for an economic success anymore, example of this is "Mittal Steel", bought from those pampered idiots right before the huge price surge of steel on the worldmarket.
As for Libya I am really sorry but you know even less about that country than about Iceland and international financing.

To Kapitein Andre

Submitted by Hjörtur J. Guðmundsson on Tue, 2009-12-08 18:05.

The Icelandic authorities simply took the steps they saw as necessary to ensure the stability of the Icelandic economy and to prevent its total collapse as provided in the EEA Agreement between Iceland (EFTA) and the European Union.

Regarding the Anglo-Dutch loans your criticism should be directed at the current left-wing government in Iceland alone. It agreed to the agreements with the Dutch and British governments without having consulted the parliament first. As I understand under heavy pressure from the two governments but nevertheless.

The left-wing government simply decided that they had a majority in the parliament for these agreements but then it turned out to be wrong. These agreements have as a result not been agreed to yet since the approval of the parliament natuarally is a condition for that.

Now, I don't know how it is in your country (whatever that is, you obviously can´t even write under your own full name) but as far as I know it is a bit hard to break agreements that have not yet been agreed to.

Regarding the IMF and especially the ECB I, however, agree that Iceland should never have asked for their assistance. But not for the same reasons you mentioned.

P.s. I still would like an answer to my question why on Earth the Dutch and British government don't want to take this dispute to the courts if they really believe they have such a solid case?

Naturally, I'm sympathetic

Submitted by Frank Lee on Tue, 2009-12-08 05:15.

Naturally, I'm deeply sympathetic toward Iceland's financial problems, considering the painful sacrifices the Icelanders have made and the blood they have shed assisting our battles against Nazism, Stalinism, and Islamism.

Austrian economics, anyone?

Submitted by RS on Tue, 2009-12-08 02:00.

Central banking, in collaboration with fractional reserve commercial banking, has been the principal global engine of inflation and periodic economic crises since 1914. Iceland would be the perfect place to end this reign of folly and immiseration and in so doing solve its own economic problems.

In brief: close Iceland's central bank and rescind Iceland's legal tender laws that have created a government monopoly for the króna. Let consumers and businesses use whatever currency or currencies they prefer, domestic or foreign. Let private Icelandic banks issue their own coinage and currency, with a clearing house to settle interbank debits and credits on a daily basis. If a particular bank cannot redeem its deposits at the end of the day, that's it. It doesn't open the next morning and depositors must be paid off by the remaining clearing house members. This will prompt them to discipline earlier rather than later any member bank taking on unsound loans or excess leverage.

Consumers and banks will gravitate to the currencies that best preserve their value and have the most reliable reserve backing. The others will disappear.

Iceland will become a world banking center and will initiate a sea change in banking elsewhere, as investors desert inflated government currencies and bubble-prone credit systems.

The details are in F.A. Hayek, _Good Money, Part II, The Standard_, vol 6 of The Collected Works of F.A. Hayek, edited by Stephen Kresge (The University of Chicago Press, 1999).

Running amoc

Submitted by marcfrans on Tue, 2009-12-08 00:40.

I don't know whether Iceland deserves to be described by Kapitein Andre here as a kind of Scandinavian version of Argentina or Venezuela, but I take exception to the claim that Icelandic banks have been "running amoc in foreign markets to accumulate assets".  Running amoc implies some kind of overwhelming force imposition  which tiny Iceland does not possess.  It is inappropriate to blame outsiders for one's own 'banking regulation' failures.  And, persons/companies providing "assets" to others remain responsible for their own decisions (which were no doubt guided by personal interest or 'greed').

 

 

Further to my Comments

Submitted by Kapitein Andre on Mon, 2009-12-07 23:02.

It remains uncertain whether or not the Deposit Guarantee Directive (94/19/EC) applies to the European Economic Area, and specifically to the "Icesave Dispute". However, observers of the subprime mortgage-precipiated crisis and recession will note that the US government could have left AIG and other affected institutions' counterparties high and dry as a prerequisite of TARP.  Whether taxpayers indirectly and unnecessarily bailed out Goldman Sachs and others, or whether honoring these agreements was key to stabilizing the capital and credit markets is not the point. 

 

Instead of disputing 94/19/EC, the Icelandic government should have divined that the Netherlands, UK and EU in general are not only vital partners, but also strategic partners during times of crisis, and acted accordingly.  As it is, how can Iceland source loans from the ECB or IMF without these partners? 

 

Note to Iceland: don't bite the hand that feeds you.

To Kapitein Andre

Submitted by Hjörtur J. Guðmundsson on Tue, 2009-12-08 00:51.

Thanks for your comments, they strike me as in the same spirit as the attitute of the British and Dutch governments. A small country like Iceland should just behave or else. The article simply deals with the two key facts of this issue: There is and was no state guarantee and there are no laws that cover what happened in Iceland when it comes to deposits guarantees.

It should be obvious that Iceland is not entirely innocent, it had reckless businessmen and authorities who slept on their guard (like in so many other countries as well). But this was all made possible by the failed EU laws and the financial authorities in the UK and the Netherlands slept pretty damn well on their guards as well.

Iceland has always been willing to find a solution offering to shoulder part of the responsibility. That is why the Icelandic authorities agreed to try to find a political solution througt negotiations in the first place. But as the issue has been dealt with so far Iceland has been made responsible for the whole thing.

In any case if the British and the Dutch governments believe they have such a solid case then why on Earth don't they just agree to take the issue to a neutral court? What are they afraid of? Perhaps that Iceland is right?

@ Kapitein Andre

Submitted by traveller on Tue, 2009-12-08 00:03.

Bite the hand that feeds you? By bankrupting them?
Strategic partners during times of crisis? How is that in this case? The strategic partners created the crisis. The banks of Iceland were naive but didn't commit fraud like the American, English, Dutch and all other major banks.
This crash was a criminal crash of blind unrestrained greed, rewarded by the taxpayer's money.
The small insignificant Icelandic banks went ignorantly with the big banks and got clobbered. Their "strategic partners" have them by the balls now and think to squeeze the Icelandic people to do their bidding.
Who is going to bankroll them now?
Chinese, Arabs, Taiwan etc. etc. because of cheap energy and plenty of fish.

Sacficial Lamb or Two-Faced Pirate?

Submitted by Kapitein Andre on Mon, 2009-12-07 22:49.

Don't be swayed by Euro-skepticism...It is disingenuous for Mr Guðmundsson to portray Iceland as a sacrificial lamb for the cynical interests of the EU, Netherlands and UK. Mr Guðmundsson is affiliated to Iceland’s Independence Party. In power, the Independence Party had no problem with Icelandic banks running amok in foreign markets to accumulate assets, nor with their over–leveraging, which created a foreign debt five times larger than the country’s GDP.

On the whole, the Icelandic banking system is reliant upon access to foreign capital, given the country’s limited resources and market size. The government was well aware of this fact, and so it can hardly begin crying foul when its retreat to economic nationalism was punished by the “bigger fish”. Iceland did discriminate against foreign retail creditors of Landsbanki (“Icesave”), even as guarantees to all creditors in the Netherlands and the UK were increased. Moreover, despite protestations that the EU was striving to ruin the Icelandic economy, Landsbanki’s UK operations held enough assets to cover the minimum deposit insurance mandated by the EU’s Deposit Guarantee Directive.

When Iceland did negotiate a deal to use British and Dutch loans to provide deposit insurance to the Anglo-Dutch retail creditors, the Icelandic parliament then limited payments on foreign debts six months later.

If the Icelandic economy is in ruins, it is due to the risky activities of Icelanders, not due to foreign pressure. Instead of acting in good faith, Iceland decided to antagonize those governments whose markets it had previously courted during the boom times. If, as Icelandic officials would have it, this is a systemic problem and solutions should maximize the greater good, how does Iceland’s banking system fit into the equation? How are 300,000 Icelanders worth more than 300,000 Britons? Let us see Iceland play fast and loose with the Russians, and see how far they get...

tax haven

Submitted by Cogito on Mon, 2009-12-07 12:38.

The best solution for Iceland is to reorganise as a tax haven and thus become the most hated annoyance and pain in Europe's ass.

For instance: now that Denmark is not offering VAT evasion in the EU for private N-registered (US) GA Aircraft anymore, let Iceland organise this vacuum in the market.

And so on.

Well yes

Submitted by Hjörtur J. Guðmundsson on Sat, 2009-12-05 23:38.

Well I guess they do. This is probably not a bad guy or anything, but criticism of the EU is quite obviously not something he is willing to tolerate.

Naive?

Submitted by KO on Sun, 2009-12-06 11:31.

Thank you for this expose, Mr. Guthmundsson. Your underlying assumption, however, seems to be that the EU could reasonably have been expected to maintain minimal standards of fairness and truthfulness. I can't imagine what the basis could be for such an assumption. The EU is obviously an unaccountable, imperialistic bureaucracy whose only goal is power, which it enhances by destroying nations and their sovereignty. The disgraceful behavior of the British and Dutch governments in oppressing Iceland illustrates why nearly all European governments have joined the EU: it gives them new tools to enhance their own power to oppress and defraud.

The Icelandic official you quote is plainly in on the fraud, willing to side with the EU in weakening Iceland and lying to Icelanders to do so.

Pardon my ignorance, but what happened to the enterprizing, obstinate Icelanders of the sagas? The enterprizing, obstinate Americans of the Revolution have lost control of our governments, but at least we still hear from them daily.

To KO

Submitted by Hjörtur J. Guðmundsson on Sun, 2009-12-06 12:13.

Well, naturally you are right about the EU. I don't expect Brussels to change their mind and all the sudden decide to treat us fairly. That probably won't happen. At the same time this is a good example of how Iceland would be treated within the EU. We are too small to matter to the EU on the outside. On the inside it would be the same, the only difference is that then we would be completely under the EU's heel. On the outside we have the freedom to do business and have relations with other parts of the world. Fortunately I don't think Iceland will ever join the EU.

The current Icelandic left-wing government, mainly the senior government partner the social democrats, are certainly in on the plot. They simply act as if they are already in the EU, what Brussel says are orders which must be complied with. The junior partner, the socialists, are opposed to EU membership according to their manifesto. However, they have shown they are willing to go quite far to ensure staying in government with the social democrats. Including giving in to the demands of the British and Dutch governments and apply for EU membership. Mrs Gísladóttir mentioned in the article is a social democrat.

The British and Dutch governments wanted the Icelandic authorities to grant a state guarantee for the Icesave deposits this summer but the issue has dragged along mainly due to fierce opposition from Icelanders and the opposition in the Icelandic parliament. We still don't know how this will go. The amounts the British and Dutch governments want us to pay are enormous for a small nation like us. It might easily ruin us completely.

Fierce opposition

Submitted by KO on Sun, 2009-12-06 13:04.

@ Mr. Guthmundsson: Thank you for your reply. I am delighted to hear about the Icelanders' "fierce opposition" to joining the EU. I agree that this episode illustrates what life in the EU would be like for Iceland. I don't share your optimism, however, about Iceland staying out of the EU. The EU, and its client parties all across Europe, don't care a fig for popular opposition. Their theory of governance is this: "We are your overlords."

KO:

Submitted by Hjörtur J. Guðmundsson on Sun, 2009-12-06 13:37.

Norway has managed to stay out of the EU and went through two referendum on the issue. Still, for a long time two of their biggest political parties have been in favour of membership. I believe it is even less likely that Iceland will join the EU than Norway.

Fortunately there is not only opposition to EU membership among the Icelandic people but also the political parties. Of the five political parties represented in our parliament only one can be defined as pro-EU, the social democrats.

Of course you can't tell anything for sure about how this will go but I'm still very optimistic. But that doesn't mean I'm taking anything for granted, this will be fought to the last man. There is of course simply way too much at stake.

@ Mr. Guthmundsson

Submitted by KO on Sun, 2009-12-06 15:16.

Beware of sham opposition among your politicians. The socialists are not the only ones who can find excuses to support EU membership while pretending to oppose it. Look at the Terrible Tories in Britain, who appear to have done nothing to hinder the EU juggernaut, whilst promising to hold a referendum on Britain's membership. At least, their efforts are so minimal they cannot be seen from across the Atlantic without a powerful telescope.

Europeans should take a lesson from American constitutional history on the likely fate of a constitution that purports to limit the powers of the central government and preserve the rights of state governments. That structure is a dead letter here. The states and their subdivisions live on handouts from the federal government, which soaks up 90% of the available tax money. The limited powers of the federal government have expanded to encompass all aspects of life through interpretation of the Congress's power to "regulate Commerce," spend for the general welfare, and ensure "equal protection under the laws." A system of government is no better than the people that tolerates it.

Well

Submitted by Hjörtur J. Guðmundsson on Sat, 2009-12-05 21:44.

Jón Frímann is a hard line europhile in Iceland. He always takes the position of the European Union and obviously believes the EU is some kind of a promised land. As a result everyone who doesn't agree with him and dare to criticise the EU is therefore a lier accroding to him. It doesn't matter what is said, if it doesn't suit the EU it is a lie.

Thanks

Submitted by Hjörtur J. Guðmundsson on Sat, 2009-12-05 13:30.

Thanks for your advice, I don't think Iceland will ever join the EU and hopefully we will be able to stand firm in this Icesave dispute even though our current leftwing government is totally in the pocket of the British and Dutch governments.

Advice to Iceland

Submitted by traveller on Sat, 2009-12-05 12:31.

Ignore Europe.
Don't give your fish to Europe, on the contrary.
Start a Luxemburg type banking system in Iceland.
Make Iceland a freeport and free trading zone.
Start energy intensive industries in Iceland.
Start data centre operations in Iceland.
In short, be Icelandic and f..k Europe.
Don't pay a dime to the UK and the Netherlands and let them go to court.