The Lawspeaker
03-06-2010, 11:44 PM
Iceland rejects Icesave repayment deal (http://www.ft.com/cms/s/0/2551a7e6-2937-11df-972b-00144feabdc0.html?nclick_check=1)
Icelanders voted overwhelmingly on Saturday to reject a €3.9bn debt repayment deal with Britain and the Netherlands in a move that threatens to derail international support for the country’s crisis-hit economy.
With half the vote counted 93.6 per cent voted against the plan to reimburse money lost by British and Dutch depositors in the failed Icesave bank when Iceland’s banking sector collapsed in 2008.
Only 1.5 per cent supported the deal, with another 4.8 per cent casting empty or spoilt ballots.
The resounding rejection reflected deep public anger over a deal which critics said would punish taxpayers for the mistakes of bankers and regulators and pile more debts on a country of 320,000 people struggling to rebuild its shattered economy.
The outcome will force the three countries back to the negotiating table after more than a year of abortive efforts to solve a dispute that has held up crucial loans from the International Monetary Fund and cast a cloud over Reykjavik’s bid to join the European Union.
Jóhanna Sigurdardóttir (http://www.ft.com/cms/s/0/d7c451d4-286b-11df-9f8f-00144feabdc0.html), prime minister, said the government remained committed to repaying the Icesave debt and vowed to continue talks with Britain and the Netherlands to find a compromise.
Össur Skarphédinsson, foreign minister, urged the two countries to heed the “strong cry of defiance” delivered by Icelanders and agree to soften the terms of repayment.
While the outcome had long been a foregone conclusion, many voters appeared to relish the chance to vent anger against a deal that would lumber every Icelandic household with a debt equivalent to €48,000.
“I voted no because it is a bad deal for Iceland,” said August Kalsson, a 50 year-old therapist after casting his ballot in Reykjavik city hall. “We should pay our debts but responsibility should be shared more equally between the three countries because it was not all our fault.”
Rejection of the deal had been all but certain from the moment Olafur Ragnar Grimsson, Iceland’s president, triggered the referendum in January by refusing to sign legislation backing an agreement struck with the UK and Dutch governments last year. More than a quarter of the population had signed a petition urging the veto.
The result represented a rebuke for Iceland’s centre-left ruling coalition, which agreed the deal last year and has staked its credibility on resolving the Icesave dispute. But the government distanced itself from the legislation ahead of the referendum (http://www.ft.com/cms/s/0/f605af94-27b2-11df-863d-00144feabdc0.html) in a bid to limit the political damage and entered fresh talks with its UK and Dutch counterparts in search of a better deal.
Mr Skarphédinsson said the result was no surprise because the legislation being voted on had already been superseded by a recent offer by Britain and Netherlands to lower the 5.5 per cent interest rate.
Some analysts had predicted that a no vote could cause the government to collapse. But Ms Sigurdardóttir said she had no intention of stepping down and there was no immediate sign of opposition parties mounting a push to oust the government.
Turnout remained unclear late on Saturday but officials said the figure was much lower than the 85 per cent participation in last April’s parliamentary election.
Stefan Cilia, a 29 year-old computer programmer was among the minority who voted yes to the bill. “Not because I think it is a fair deal but to send a message that this should have been over and done with a long time ago,” he said, explaining his vote. “The entire government has been tied up with Icesave for a year and a half and nothing else is getting done. There are more important challenges to focus on.”
Ms Sigurdardóttir said negotiations with Britain and the Netherlands were likely to resume next week and voiced confidence that a compromise was within reach after the recent narrowing of differences.
There was little immediate sign of accommodation from the Netherlands on Saturday as the country’s foreign minister made clear that failure to resolve the dispute could sour Dutch attitudes towards Iceland’s application to join the EU.“This issue will be part of our considerations when deciding about the opening of accession negotiations with Iceland,” Maxime Verhagen told reporters on the sidelines of a meeting of European foreign ministers in Cordoba, Spain.
Iceland applied to join the EU last year and the European Commission recommended the go ahead for accession talks earlier this month. But support is needed from all 27 member states for a new country to join.
Roughly 400,000 British and Dutch customers deposited money with Icesave, the online arm of Reykjavik-based Landsbanki, attracted by market-beating interest rates as the troubled Icelandic banking sector sought foreign deposits to shore up its over-stretched balance sheets.
The British and Dutch depositors were compensated through each country’s bank deposit guarantee schemes after Icesave collapsed in October 2008 and the two governments are now seeking to reclaim the money from Iceland.
Up to 90 per cent of the money owed could be covered by the sale of assets salvaged from Landsbanki, the collapsed owner of Icesave. But Britain and the Netherlands want Reykjavik to provide a sovereign guarantee to pay any shortfall.
Ms Sigurdardóttir said Iceland was the victim of “faulty regulation” in the European Union, having been bound as a member of the European Economic Area to rules on cross-border bank deposit guarantees that were not designed to cope with systemic collapse of an entire banking system. She said Iceland had never accepted its legal obligation to provide a sovereign guarantee to repay the money, but had agreed to do so in order to resolve the dispute.
“Icelanders are proud people who wish to shoulder their obligations,” she said. “But the commitments must be fair, reasonable and normal.”
The Financial Times (http://www.ft.com/cms/s/0/2551a7e6-2937-11df-972b-00144feabdc0.html?nclick_check=1)
March 6, 2010
Icelanders voted overwhelmingly on Saturday to reject a €3.9bn debt repayment deal with Britain and the Netherlands in a move that threatens to derail international support for the country’s crisis-hit economy.
With half the vote counted 93.6 per cent voted against the plan to reimburse money lost by British and Dutch depositors in the failed Icesave bank when Iceland’s banking sector collapsed in 2008.
Only 1.5 per cent supported the deal, with another 4.8 per cent casting empty or spoilt ballots.
The resounding rejection reflected deep public anger over a deal which critics said would punish taxpayers for the mistakes of bankers and regulators and pile more debts on a country of 320,000 people struggling to rebuild its shattered economy.
The outcome will force the three countries back to the negotiating table after more than a year of abortive efforts to solve a dispute that has held up crucial loans from the International Monetary Fund and cast a cloud over Reykjavik’s bid to join the European Union.
Jóhanna Sigurdardóttir (http://www.ft.com/cms/s/0/d7c451d4-286b-11df-9f8f-00144feabdc0.html), prime minister, said the government remained committed to repaying the Icesave debt and vowed to continue talks with Britain and the Netherlands to find a compromise.
Össur Skarphédinsson, foreign minister, urged the two countries to heed the “strong cry of defiance” delivered by Icelanders and agree to soften the terms of repayment.
While the outcome had long been a foregone conclusion, many voters appeared to relish the chance to vent anger against a deal that would lumber every Icelandic household with a debt equivalent to €48,000.
“I voted no because it is a bad deal for Iceland,” said August Kalsson, a 50 year-old therapist after casting his ballot in Reykjavik city hall. “We should pay our debts but responsibility should be shared more equally between the three countries because it was not all our fault.”
Rejection of the deal had been all but certain from the moment Olafur Ragnar Grimsson, Iceland’s president, triggered the referendum in January by refusing to sign legislation backing an agreement struck with the UK and Dutch governments last year. More than a quarter of the population had signed a petition urging the veto.
The result represented a rebuke for Iceland’s centre-left ruling coalition, which agreed the deal last year and has staked its credibility on resolving the Icesave dispute. But the government distanced itself from the legislation ahead of the referendum (http://www.ft.com/cms/s/0/f605af94-27b2-11df-863d-00144feabdc0.html) in a bid to limit the political damage and entered fresh talks with its UK and Dutch counterparts in search of a better deal.
Mr Skarphédinsson said the result was no surprise because the legislation being voted on had already been superseded by a recent offer by Britain and Netherlands to lower the 5.5 per cent interest rate.
Some analysts had predicted that a no vote could cause the government to collapse. But Ms Sigurdardóttir said she had no intention of stepping down and there was no immediate sign of opposition parties mounting a push to oust the government.
Turnout remained unclear late on Saturday but officials said the figure was much lower than the 85 per cent participation in last April’s parliamentary election.
Stefan Cilia, a 29 year-old computer programmer was among the minority who voted yes to the bill. “Not because I think it is a fair deal but to send a message that this should have been over and done with a long time ago,” he said, explaining his vote. “The entire government has been tied up with Icesave for a year and a half and nothing else is getting done. There are more important challenges to focus on.”
Ms Sigurdardóttir said negotiations with Britain and the Netherlands were likely to resume next week and voiced confidence that a compromise was within reach after the recent narrowing of differences.
There was little immediate sign of accommodation from the Netherlands on Saturday as the country’s foreign minister made clear that failure to resolve the dispute could sour Dutch attitudes towards Iceland’s application to join the EU.“This issue will be part of our considerations when deciding about the opening of accession negotiations with Iceland,” Maxime Verhagen told reporters on the sidelines of a meeting of European foreign ministers in Cordoba, Spain.
Iceland applied to join the EU last year and the European Commission recommended the go ahead for accession talks earlier this month. But support is needed from all 27 member states for a new country to join.
Roughly 400,000 British and Dutch customers deposited money with Icesave, the online arm of Reykjavik-based Landsbanki, attracted by market-beating interest rates as the troubled Icelandic banking sector sought foreign deposits to shore up its over-stretched balance sheets.
The British and Dutch depositors were compensated through each country’s bank deposit guarantee schemes after Icesave collapsed in October 2008 and the two governments are now seeking to reclaim the money from Iceland.
Up to 90 per cent of the money owed could be covered by the sale of assets salvaged from Landsbanki, the collapsed owner of Icesave. But Britain and the Netherlands want Reykjavik to provide a sovereign guarantee to pay any shortfall.
Ms Sigurdardóttir said Iceland was the victim of “faulty regulation” in the European Union, having been bound as a member of the European Economic Area to rules on cross-border bank deposit guarantees that were not designed to cope with systemic collapse of an entire banking system. She said Iceland had never accepted its legal obligation to provide a sovereign guarantee to repay the money, but had agreed to do so in order to resolve the dispute.
“Icelanders are proud people who wish to shoulder their obligations,” she said. “But the commitments must be fair, reasonable and normal.”
The Financial Times (http://www.ft.com/cms/s/0/2551a7e6-2937-11df-972b-00144feabdc0.html?nclick_check=1)
March 6, 2010