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Urdur

Iceland ‘can’t Wait’ For Imf Review, Funds

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Sept. 29 (Bloomberg) -- Iceland can’t afford to wait any longer for its International Monetary Fund review and the transfer of the second tranche of its IMF-led bailout loan, Prime Minister Johanna Sigurdardottir said.

“The review of Iceland’s program has been delayed for way too long,†Sigurdardottir said in an interview in the township of Gardabaer in Iceland on Sept. 26.

The IMF is withholding the payments until a dispute with the U.K. and the Netherlands over depositor claims is resolved. Last year’s failure of Landsbanki Islands hf, which provided Internet accounts known as Icesave, left thousands of British and Dutch depositors in the dark about how to recoup their life savings and prompted the U.K. to deploy anti-terror laws to freeze Icelandic assets until the country agreed to cover the claims.

“We are still hoping that the program will be reviewed in October,†Sigurdardottir said. “However, it’s clear that the IMF wants to see a solution in the Icesave matter, prior to Iceland’s review with the fund.â€

The coalition government on June 6 agreed to take a 2.35 billion-pound ($3.74 billion) loan from the U.K. and 1.2 billion euros ($1.76 billion) from the Netherlands to cover the deposit guarantees. That agreement was shelved after the Atlantic island’s lawmakers demanded changes, including linking debt payments to Iceland’s economic growth rate and a clause enabling renegotiation if the loan isn’t repaid by 2024.

‘More Elusive’

The Atlantic island is relying on a $5.1 billion international loan, including $2.5 billion from the Nordic states of Sweden, Finland, Norway and Denmark, and $2.1 billion from the IMF. Without these funds, Iceland risks a second collapse, Finance Minister Steingrimur J. Sigfusson has said. To date, Iceland has received $827 million in IMF funds.

“Solving the Icesave matter under the conditions placed by parliament has proven to take longer, be more difficult and more elusive, than we anticipated,†the premier said. “We assume a formal answer from the Netherlands and the U.K. to the conditions and how we can uniformly move forward will arrive shortly.â€

If the IMF review, originally scheduled for February, doesn’t take place at the fund’s next board meeting, it will jeopardize “the restructuring of Iceland’s banks, bringing down interest rates and other economic measures underway meant to get Iceland back on track,†Sigurdardottir said.

‘Hardship’

“As all these things are interrelated, it’s imperative that we reach a solution which satisfies all parties, the U.K. and the Netherlands, as well as Iceland,†said Sigurdardottir. “A solution that forces hardship on Iceland and Icelanders isn’t a solution I can agree to.â€

Most Icelanders are opposed to the government’s agreement to cover foreign deposits. An Aug. 5 poll showed 68 percent of voters don’t back the accord. Sigfusson, who heads the junior coalition Left Green party, has called the agreement “unfair.â€

“It’s extremely important that both the U.K. and the Netherlands understand that Iceland is eager to honor its obligations,†Sigurdardottir said. “However, taking on more than we can handle isn’t going to benefit anyone. This perceived link between the solution to the Icesave issue and the IMF program is, in my mind, unfortunate to say the least.â€

Failing a U.K. and Dutch agreement of the conditions placed by Iceland’s parliament, the country’s government will have to ask lawmakers to re-open the debate in the Althingi.

‘Imperative’

“I would be concerned if parliament has to debate the Icesave matter again,†Sigurdardottir said. “Obviously, that would call for a majority with the coalition parties, as we can’t rely on the opposition.â€

Sigurdardottir said she was appealing to the IMF and Nordic countries to allow disbursement of the bailout as soon as Iceland reaches an understanding with the U.K. and the Netherlands, to pre-empt any lawmaker demands to re-open the Icesave debate.

“It’s imperative that the IMF and the Nordic countries agree that an agreement between the coalition parties on passing the bill is enough for the disbursement of the second part of the IMF loan,†she said.

The failure of Iceland’s biggest banks last year forced the government to impose capital restrictions to prevent a sell-off of the krona after the currency lost as much as 80 percent of its value against the euro on the offshore market. The controls have failed to prevent a 7.7 percent decline in the krona against the euro this year, making it the second-worst performer of the 26 emerging market currencies tracked by Bloomberg.

The central bank, which shares Europe’s highest benchmark interest rate with Serbia, on Sept. 24 left the rate at 12 percent. Sigurdardottir’s government has said the success of its economic reforms will be measured by the ability of the bank to lower the key rate below 10 percent.

“The next interest rate decision will be taken by the central bank on Nov. 5, and one can only hope for conditions to improve sooner, allowing for an opportunity for an earlier easing of monetary policy,†Sigurdardottir said. “Maintaining stability in the labor market will become difficult if the interest rates cannot be brought down.â€

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The Atlantic island is relying on a $5.1 billion international loan, including $2.5 billion from the Nordic states of Sweden, Finland, Norway and Denmark, and $2.1 billion from the IMF. Without these funds, Iceland risks a second collapse, Finance Minister Steingrimur J. Sigfusson has said. To date, Iceland has received $827 million in IMF funds.

So Iceland could be even more screwed then. Would another collapse make the end bailout cheaper? The vultures must be circulating to strip the carcass bare.

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So, Iceland collapsed, and house prices went down some 10% or so, then up a bit?

Wow.

Hahaha...I seriously doubt that this graph is showing the correct picture.

The reason....there is hardly any movement on the housing market at all..

Complete and utter FREEZE for the past year or so, so it's quite difficult to determine the real market value of properties.

The Central Bank however expects a 50% decrease in house prices from the highest values in 2007.

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Complete and utter FREEZE for the past year or so, ....

It will be good for the igloos then. :rolleyes:

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This is the Icelandic Property Registry - like the UKs Land Registry

http://www.fasteignaskra.is/Forsida :blink:

http://www.icenews.is/index.php/2009/08/08...s-in-reykjavik/ [might be easier]

Depressed house sales in Reykjavik

Five times fewer property purchase contracts were recorded in Reykjavik in the first seven months of the year, compared to the same time in 2007, according to information from the Icelandic Property Registry. Purchase contracts have gone down by roughly half compared with January-July last year.

Visir.is reports that a total of 1,029 home purchase contracts were registered in the Icelandic capital in the first seven months of the year. Comparing the figure to 2004, it is clear that roughly five times more contracts were signed in the same period that year.

When July 2009 is compared with June 2009, the number of houses sold actually increased by 9.6 percent – although June’s figure was 59.7 percent lower than June 2008.

The turnover of property in the capital has not been lower in the first seven months of any year since the Icelandic Property Register started collecting the figures.

A recent Landsbanki economic report revealed that property prices have decreased by around 13 percent compared to named prices at the peak in January 2008. The reduction in property prices has an effect on inflation figures, where property prices have a huge impact. Rocketing house prices had a strong effect on Icelandic inflation during the upswing between 2004 and 2007.

--------------------

Edited by HouseDog

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People talk about "Iceland collapsed".

As a country, it didn't, though, really.

Its not like a war or natural disaster has ruined them, they still have all the national assets that they always did.

So, their currency doesn't buy loads of imported baubles? So what!

They managed pretty much on their own for a long, long time, they can again.

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So, their currency doesn't buy loads of imported baubles? So what!

I suppose it depends how many jobs there depended on the distribution, marketing and retailing of those baubles.

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So, Iceland collapsed, and house prices went down some 10% or so, then up a bit?

Wow.

I saw that too and couldn't believe it. Dead Icelandic Cat Bounce. Property bulls could claim they aren't making any more land, but in Iceland, that isn't true.

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If there is another collapse in Iceland will that cause a chain reaction or is Iceland too small to matter?

Not sure..it could cause some problems in the UK, since alot of british retail businesses are currently owned

by the new Icelandic state run banks..I think these businesses employ around 50000 people in the UK.

But another collapse is hardly going to cause a chain reaction on foreign banks..me thinks..

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