Iceland's citizens to stiffen government's spine and stand up to bullies

[He3]

The citizens of Iceland are likely to vote themselves a future tomorrow and in doing so may do the citizens of Ireland and of other countries a major favour.

Mainstream business-press commentators have increasingly swing behind the Icelanders. Here is John Kay of the Financial Times -

The citizens of that most placid of countries, Iceland, now backed by their president, have found a characteristically polite and restrained way of disputing an obligation to stump up large sums of cash to pay for the arrogance and greed of other people. They are right. We should listen to them before the same message is conveyed in much more violent form, in another place and at another time. But it seems unlikely that we will.

That piece was written in January. Since then Enda Kenny has said that there will be revolution in the streets if our government pumps more billions into Anglo on top of the €10 billion 'lent' quietly to that 'bank' by the Central Bank.

In this contest between the government and the governed in Iceland the people have come to the view that the government has failed to represent their best realistic interests. Tomorrow the wishes of the islanders may prove paramount.

As an Irish observer puts it -

Finally, somebody somewhere seems to have shouted stop. Specifically, they have challenged the new orthodoxy that taxpayers must shoulder losses associated with national bank collapses because the consequences of not doing so are far worse: pariah status for their country in the international debt markets.

Cantillon - The Irish Times - Thu, Jan 07, 2010

He points out that if Iceland holds the line and avoids fire and brimstone plummetting from the heavens, Irish people may feel like they were mugged.

It is the argument that underlies the National Asset Management Agency and the rescue of Anglo Irish Bank in particular. If we don’t keep AIB and Bank of Ireland going – and Anglo on life-support – the ability of the country to borrow will be severely impaired, or so we are told.

Events in Iceland may well prove a test of this hypothesis, assuming the people of Iceland don’t “see sense” and vote through the proposal to repay Icesave depositors in a referendum. Assuming they don’t, it will be interesting to see if the apocalyptic consequences that have been predicted manifest themselves. If they don’t, and such things rarely do, it will call into question the logic of our own bank-friendly approach to dealing with the banks.

The stakes could hardly be higher. Kay describes how things went so wrong:

We made a mistake in the closing decades of the 20th century. We removed restrictions that had imposed functional separation on financial institutions. This led to businesses riddled with conflicts of interest and culture, controlled by warring groups of their own senior employees. The scale of resources such businesses commanded enabled them to wield influence to create a – for them – virtuous circle of growing economic and political power. That mistake will not be easily remedied, and that is why I view the new decade with great apprehension. In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

Irish people are hard to anger. NAMA is an obscure enemy whose outline is only slowly becoming seen for what it is. Will NAMA in its present form survive the ripples that may spread from a popular revolt in Iceland?

[Dreaded_Estate]

I think Iceland's stance is forcing many to rethink the idea that bank debt should have anything to do with the state.

Any implicit or explicit "guarantee" from the state to private banks must be removed forever.

[Sync]

So really nothing to do with Iceland's problems (Which we already have multiple threads on), just an effort to whine about NAMA some more (Which we also have multiple threads on).

There is no practical parallel between the international reaction to public/govt intervention regarding Iceland's handling of debts to Netherlands/UK and Ireland's handling of our internal banking issues. To think there is shows an utter lack of understanding both of the Icesave collapse and the NAMA project.

If you want to draw a comparison between us and Greece, that works a bit better.

[libertarian-right]

So really nothing to do with Iceland's problems (Which we already have multiple threads on), just an effort to whine about NAMA some more (Which we also have multiple threads on).

There is no practical parallel between the international reaction to public/govt intervention regarding Iceland's handling of debts to Netherlands/UK and Ireland's handling of our internal banking issues. To think there is shows an utter lack of understanding both of the Icesave collapse and the NAMA project.

If you want to draw a comparison between us and Greece, that works a bit better.

Iceland - Squeeze on credit, squeeze on financing their short term debt, run on the banks, insolvent banks.

Ireland - Squeeze on credit, insolvent banks, huge deficit, property bubble.

So we are not allowed to talk about how Iceland dealt with their insolvent banks? What does a huge deficit (like Greece and Ireland) have to do with insolvent banks?

Iceland have lower unemployment then us. Fact. Ireland is shrinking more then Iceland this year in terms of GDP. Fact. Iceland's largest bank was placed into receivership. Even their Prime Minister, said that the "Icelandic economy could be sucked with the banks into the whirlpool and the result could have been national bankruptcy."

It is perfectly acceptable to compare Irelands/Icelands government intervention on the banks.

[Sync]

Iceland - Squeeze on credit, squeeze on financing their short term debt, run on the banks, insolvent banks.

Ireland - Squeeze on credit, insolvent banks, huge deficit, property bubble.

So we are not allowed to talk about how Iceland dealt with their insolvent banks? What does a huge deficit (like Greece and Ireland) have to do with insolvent banks?

Iceland have lower unemployment then us. Fact. Ireland is shrinking more then Iceland this year in terms of GDP. Fact. Iceland's largest bank was placed into receivership. Even their Prime Minister, said that the "Icelandic economy could be sucked with the banks into the whirlpool and the result could have been national bankruptcy."

It is perfectly acceptable to compare Irelands/Icelands government intervention on the banks.

Iceland DIDN'T deal with their banking crisis. That's the difference. Iceland decided they would let Netherlands and the UK do that for them, and then complain about the manner in which that occurred. That's where their current issues are coming from, along with the lack of trust the international markets have in them.

Now if the OP wanted to investigate how doing something similar might affect Ireland, then fine, do that. But right now there's a difference between not fully compensating certain races in the event of bank problems (which is what the Icelanders want), and not bailing out the banks themselves.

They're 2 utterly different situations if you've got an eye for the details. If you want to take the tack of "Well both situations have the words "banks" in them, and sure we're both on islands. They must be directly linked!" then I'll let you guys get on with it.

[He3]

Sync concentrates on points of differentiation and so averts his/her eyes. It is a point of view in a head/sand-bucket way.

Both countries face decisive moments. Both governments bought into deals to settle other people's debts which place the burden of those debts on the shoulders of the citizens at large. Like Enda Kenny, Cantillon and others recognise, how the citizens react to this is the point of common concern.

As Elaine Byrne asks:

What are the consequences when the voices of civic society become louder in a country’s economic affairs?

Should Ireland's citizens refuse to bail out the banks? - The Irish Times - Tue, Mar 02, 2010

[constitutionus]

you know i have to say i find whats going on in iceland facinating.

mainly becuase im not sure if i belive a bloody thing im being told about it by the mainstream media.
on the one hand they like to protray them as being destitue and desperate to join the EU.

on the other the polls show the majorty there dont want to join it and if a referendum was held on it, it would fail (mainly on the grounds of not ponying up the fising grounds that the majority of the country make a living out of) .

were constantly being told its a basket case and its used as a term of abuse to castigate other countries , yet its unemployment rate is 8%.

damn near HALF ours.

it probably doenst help that when a popular uprising occurs and the people STORM the countrys finance ministry for some reason RTE doest deem this worth broadcasting, leaving it to davy mac to do so A YEAR LATER.

and now we have a stituaion where the population looks likely to tell the brits to get stuffed in a referendum on whether to cough up the dough to em that savers lost on risky investments.

it really is amazing.

im starting to think the entire population is one step away from lynching everyone in goverment.

[ibis]

The Icelanders still aren't voting on defaulting on their banks' debt, though, let alone voting to do it.

[Sync]

Sync concentrates on points of differentiation and so averts his/her eyes. It is a point of view in a head/sand-bucket way.

Both countries face decisive moments. Both governments bought into deals to settle other people's debts which place the burden of those debts on the shoulders of the citizens at large.

Again, fundamental misunderstanding of what happened in Iceland. To stick with your bucket line I'll simplify it.

My friend in Iceland deposit 100 Krona into Icesave savings accounts. I, in UK, deposit 100 krona into Icesave savings accounts.

Now my reason for being happy to do so is that there's a bucket maintained by the Icelandic govt part of our money is dropped into, just in case anything happens the bank.

The economy of the world changes. Now in 2007 my UK govt says "well gosh, we're not sure that bucket's big enough. Maybe you should withdraw your money" Now the Icelandic govt hit the roof over this. They threaten to sue my govt, tell the entire world that of course the bucket is ok, that the UK are trying to undermine their sovreignty and of course my money is still guaranteed to be safe.

Icesave then falls over, and the government tell me that not only is there not enough in the bucket, but there's a great big hole in the bottom. The Icelandics pay my Icelandic friend his 100 krona, offer me 10 (because I'm only British) and tell me to get stuffed.

Now those are not other people's debts. This is not the bank's fault or problem. That is Iceland's debt. They offered the guarentee. They maintained the bucket. They owe me my money. What Icesave did is irrelevant. They could have set fire to my money for all I care. It's irrelevant to me as an investor who only went there because of the bloody bucket that their govt was meant to be maintaining.

[He3]

Still focussing resolutely on the differences in the details? As I said, it is a point of view.

History shows that the world doesn't always work like that though.

These revolutions arose from such a wide variety of causes that it is difficult to view them as resulting from a coherent movement or social phenomenon.

The Revolutions of 1848