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Iceland Lawmakers May Reject Icesave Accord, Reigniting Dispute With U.k.

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http://www.bloomberg.com/apps/news?pid=206...id=a9WZKb7vSmNA

June 26 (Bloomberg) -- Iceland’s parliament may reject an accord the government struck with the U.K. and the Netherlands to cover foreign depositor claims, threatening to reignite a diplomatic spat between the countries.

As many as 33 of the 63 lawmakers in the Reykjavik-based parliament may fail to back the agreement in its current form, party leaders and individual members of the chamber told Bloomberg. The Cabinet starts discussing the accord today and parliament may debate the bill on June 29.

Prime Minister Johanna Sigurdardottir on June 6 said her coalition of Social Democrats and Left Greens agreed to take a $5.44 billion loan from the U.K. and the Netherlands to cover deposit guarantees from failed lender Landsbanki Islands hf’s internet accounts. While ending a seven-month dispute and prompting the U.K. to drop a freezing order on Landsbanki assets, the agreement has raised concern among some lawmakers.

“To this day, I have not been shown any information confirming that Iceland is legally responsible for these debts,†Health Minister Ogmundur Jonasson, a member of the Left Greens, said by telephone yesterday. “The depositors are entitled to all the assets of the failed banks, but they are not entitled to the assets of private citizens in Iceland.â€

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They can pay us in cod then.

hmmm... not sure that would go down very well with Icesave account holders

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hmmm... not sure that would go down very well with Icesave account holders

Really - tough shit.

Took an interest payment for a gamble, it didn't pay off.

More capitalism please, less QQ.

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“To this day, I have not been shown any information confirming that Iceland is legally responsible for these debts,†Health Minister Ogmundur Jonasson, a member of the Left Greens, said by telephone yesterday. “The depositors are entitled to all the assets of the failed banks, but they are not entitled to the assets of private citizens in Iceland.â€

Sounds perfectly reasonable to me.

VMR.

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Really - tough shit.

Took an interest payment for a gamble, it didn't pay off.

More capitalism please, less QQ.

Cobblers. There is something called FSA guarantees, even though it was passport scheme. It shouldn't have been allowed if there was no protection. Someone has to pay else lots of little people will sue the government costing even more money.

Plus, I'm sure there were enough people with savings accounts with them to raise their own army and burn their country to the ground.

Just because you didn't get money, you shouldn't be callous.

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Can I have a guarantee that if I go down to the bookies this afternoon you will reimburse my losses then? Obviously I will keep the winnings if there are any.

The choice is simple, either some people lose money OR the entire system collapses and everyone loses everything. We seem determined that total collapse is the way to go...........

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“To this day, I have not been shown any information confirming that Iceland is legally responsible for these debts,†Health Minister Ogmundur Jonasson, a member of the Left Greens, said by telephone yesterday. “The depositors are entitled to all the assets of the failed banks, but they are not entitled to the assets of private citizens in Iceland.â€

Sounds perfectly reasonable to me.

Minimum compensation levels and indeed their ability to operate their banks in EEA territories come from treaties to which they are party:

IceSave was Landsbanki's online deposit scheme rolled out in the U.K. and the Netherlands. It operated under E.U. directive 94/19/EC that was incorporated into the law of the European Economic Area agreement to which Iceland is a member. The directive states that each member country must operate a Depositors Guarantee Fund to insure individual depositors to a minimum of 20,000 euros.

But whether they should or can pay is another matter. As with any other country, they need to consider the pros and cons of paying vs default.

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Cobblers. There is something called FSA guarantees, even though it was passport scheme. It shouldn't have been allowed if there was no protection. Someone has to pay else lots of little people will sue the government costing even more money.

Plus, I'm sure there were enough people with savings accounts with them to raise their own army and burn their country to the ground.

Just because you didn't get money, you shouldn't be callous.

I take it you were an Icesaver? ;)

Edited by huw

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Minimum compensation levels and indeed their ability to operate their banks in EEA territories come from treaties to which they are party:

But whether they should or can pay is another matter. As with any other country, they need to consider the pros and cons of paying vs default.

http://www.iceslave.is/

Here's a link to an Icelandic web-site showing the Icesave debt in Icelandi Kronur.

There have been protests in Reykjavik against the repayment agreements agreed with UK and NL and it IS quite feasible that

The Althing will refuse to accept them.

Now this could have been a ploy all along to agree to the deal, get the anti-terrorist block lifted on monetary assets in the UK and repatriate them back to Iceland pronto then stick two fingers up at the UK before the assets are re-seized.

It's unlikely but not beyond impossibility.

If they do renege on the deal (which has a 7 year moratorium and then a further 8 year repayment period) then there's no way they could even hope to join the EC.

They would also be cast out from the European Free Trade Agreement and sent to Coventry - or it's Nordic equivalent.

However, I can see both sides of the argument re Icesave compensation.

If I was a citizen of Iceland I'd be furious that I had to pay for the foolishness and greed of just a handful of men who, it seems, have not been held to account for their actions.

Maybe the fault lies with the foreign banks that lent the Icelandic banks such ridiculous amounts of money in relation

to the size of their economy.

Unlike the UK (is there an emoticon for 'gulps' ?).

Edited by Fishman

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Can I have a guarantee that if I go down to the bookies this afternoon you will reimburse my losses then? Obviously I will keep the winnings if there are any.

The choice is simple, either some people lose money OR the entire system collapses and everyone loses everything. We seem determined that total collapse is the way to go...........

My Dad had about £100k to invest around the time they were offering 10% returns. He avoided these banks like the plague on the basis that if something looks too good to be true, then it probably is.

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Really - tough shit.

Took an interest payment for a gamble, it didn't pay off.

More capitalism please, less QQ.

I was an Icesave account holder. I took the "risk" but only up to the level in the FSCS, no more.

If I had a choice, Cod would be fine. If I could afford it I'd eat fish every night, love the stuff.

So getting "Cod-Payments" would be the perfect excuse to induldge!

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Also another thing to add, I'd not begrudge not getting a penny back, if everyone else had to suffer the same way.

If noone got bailed out (including NR, Lloyds, allt he other banks e.t.c.) then i deduce it wouldn't make much difference to me probably overall as the destruction of credit would have been so awesome, the bit I had left would have made up for it.

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Also another thing to add, I'd not begrudge not getting a penny back, if everyone else had to suffer the same way.

If noone got bailed out (including NR, Lloyds, allt he other banks e.t.c.) then i deduce it wouldn't make much difference to me probably overall as the destruction of credit would have been so awesome, the bit I had left would have made up for it.

Lot of sympathy for that view - and it's why moral hazard is so poisonous - changed the whole game from being about winning/losing under an agreed framework to proximity to Mervy kings magic machine and Gordon Browns pill cabinet.

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If they do renege on the deal (which has a 7 year moratorium and then a further 8 year repayment period) then there's no way they could even hope to join the EC.

They would also be cast out from the European Free Trade Agreement and sent to Coventry - or it's Nordic equivalent.

The deal seems to be a gamble that rising asset prices (of the bank assets) will float Iceland off the rocks. If we're really at the beginning of Great Depression 2 then that gamble is unlikely to pay off. Would it really be so bad for them to default and start with a clean slate outside EFTA? Doubtless they would be allowed back in after a suitable period of contrition and reform.

If I was a citizen of Iceland I'd be furious that I had to pay for the foolishness and greed of just a handful of men who, it seems, have not been held to account for their actions.

I agree; and the difference between an Icelandic citizen and an Icesave depositor is that the latter made an individual choice. Individual Icelanders were in the hands of their political/banking elites; it can be argued that the electorate is ultimately responsible but in practice, the average Icelander is as responsible for this mess as you or I are responsible for the Iraq war.

Maybe the fault lies with the foreign banks that lent the Icelandic banks such ridiculous amounts of money in relation

to the size of their economy.

Agreed, they'd hardly have lent the same to (say) Cardiff.

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I agree; and the difference between an Icelandic citizen and an Icesave depositor is that the latter made an individual choice. Individual Icelanders were in the hands of their political/banking elites; it can be argued that the electorate is ultimately responsible but in practice, the average Icelander is as responsible for this mess as you or I are responsible for the Iraq war.

Wasn't Iceland already wondering how to argue this case?

As I understand it, the assets of Icelandic banks were seized in London under the Anti-Terror Laws. It envisaged a legal process against the UK, but virtually no case can be made against Anti-Terror Laws in London.

European Court? Well, Iceland received loans from Britain and The Netherlands, but only on the assumption that these loans would be used to repay banks in Britain, The Netherlands and and I believe Germany too.

Clearly, citizens are held hostage to banks but there appears no legal redress.

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A clean slate, state bankrupcy, is the only solution for Iceland.

Argentina has done it and has never regretted it.

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Minimum compensation levels and indeed their ability to operate their banks in EEA territories come from treaties to which they are party:

As pointed out by the European Court of Justice in the Peter Paul and Others case, "Directive 94/19 seeks to introduce cover for depositors, wherever deposits are located in the Community, in the event of the unavailability of deposits made with a credit institution which is a member of a deposit guarantee-scheme".[63] The directive does not specify how the Member States have to provide the cover, although most operate some sort of fund to which credit institutions contribute, as in Iceland. In principle, if the fund cannot meet depositors' claims in the event of a default by a member of the scheme, it is for the remaining credit institutions to make up the difference. Such a move was impossible in the case of the Tryggingarsjóður as the remaining Icelandic credit institutions were far too small in relation to the claims of Icesave depositors, and a fortiori because Icelandic law states that "Member Companies shall not be liable for any commitments entered into by the Fund beyond their statutory contributions to the Fund."[61]

The Icelandic government has claimed that the directive was never intended to cover the case of a systemic failure, and does not impose a sovereign guarantee on deposit insurance schemes. It has repeatedly asked that the matter be taken to the EFTA Court, and points to Recital 24 to the directive:[59]

Whereas this Directive may not result in the Member States' or their competent authorities' being made liable in respect of depositors if they have ensured that one or more schemes guaranteeing deposits or credit institutions themselves and ensuring the compensation or protection of depositors under the conditions prescribed in this Directive have been introduced and officially recognized;

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The directive does not specify how the Member States have to provide the cover, although most operate some sort of fund to which credit institutions contribute, as in Iceland. In principle, if the fund cannot meet depositors' claims in the event of a default by a member of the scheme, it is for the remaining credit institutions to make up the difference.

Thanks and thanks again for very interesting insight.

So, all the English County Councils who lost money should have been compensated by schemes in place . . . . failing that, by other credit institutions.

But the Treasury is saying that none of the assets it seized from Icelandic banks will go to councils who lost money. The Treasury will not compensate Charities either. One has to wonder what happened to the money that the Treasury impounded in the first place and where it went.

The list is long . . . Kent County Council lost 50 million, Brent 27 million, Westminster 17 million . . .

Again, it seems the Government is happy to pocket the money from Iceland but not to recompense taxpayers

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Thanks and thanks again for very interesting insight.

So, all the English County Councils who lost money should have been compensated by schemes in place . . . . failing that, by other credit institutions.

But the Treasury is saying that none of the assets it seized from Icelandic banks will go to councils who lost money. The Treasury will not compensate Charities either. One has to wonder what happened to the money that the Treasury impounded in the first place and where it went.

The list is long . . . Kent County Council lost 50 million, Brent 27 million, Westminster 17 million . . .

Again, it seems the Government is happy to pocket the money from Iceland but not to recompense taxpayers

Well that's the Brown government for you - bailout the bankers so they can start paying big bonuses again to each other but don't help charities or councils out so they will as a result have to cut services to the poor and vulnerable. Says all you need to know about UK 2009!

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Thanks and thanks again for very interesting insight.

So, all the English County Councils who lost money should have been compensated by schemes in place . . . . failing that, by other credit institutions.

But the Treasury is saying that none of the assets it seized from Icelandic banks will go to councils who lost money. The Treasury will not compensate Charities either. One has to wonder what happened to the money that the Treasury impounded in the first place and where it went.

The list is long . . . Kent County Council lost 50 million, Brent 27 million, Westminster 17 million . . .

Again, it seems the Government is happy to pocket the money from Iceland but not to recompense taxpayers

To be fair, the assets were frozen rather than seized; it would hardly be right to start using the assets to preferentially make UK creditors whole. My understanding is that the assets are proposed to be unfrozen as part of the deal with Iceland.

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The Icelandic government has claimed that the directive was never intended to cover the case of a systemic failure, and does not impose a sovereign guarantee on deposit insurance schemes. It has repeatedly asked that the matter be taken to the EFTA Court, and points to Recital 24 to the directive:[59]

This is a fair point HOWEVER that's not how it was presented to depositors ... everything was advertised as being guaranteed by the Icelandic scheme. It's the same with all banks including UK ones. States that knowingly permit such things have a moral obligation to pick up the pieces when the lies come home to roost.

A state that can't pick up the pieces should just admit that it's bust IMO. As noted up-thread, states have defaulted before; they get over it. What Iceland is getting into now might turn out to be the worst of all worlds for them.

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Iceland should be hed responsible for the 20k Euro under the EEA rules. The UK should be responsible for the rest (which i think was still 30k GBP at the time). After that the depsoitors should not have been refunded. You shouldn't put more than now 50k GBP in a bank and expect it to be safe except Northern Wreck, which is part of the UK government.

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