Wednesday, January 21, 2009
Britain doesn’t have the luxury of Iceland’s “solution”
"The British government faces an excruciating choice. It cannot let Royal Bank of Scotland and its fellow mega-banks go to the wall. Yet it risks being swamped by the massive foreign debts of these lenders if it takes on their dollar, euro and yen exposure by opting for full nationalisation. The parallels with Iceland are disturbing. But Iceland at least had the luxury of letting banks default – shifting losses on to the rest of the world. It refused to honour foreign debts. The UK cannot go down that route because it would set off an asset price death spiral. So whatever the temptations, Chancellor Alistair Darling cannot copy Iceland."