But there is still a long way to go.
The referendum for or against taking over the Ice-save debts unconditionally by the Icelandic tax-payer has brought a clear “No” vote with 93.2% of those who voted, while participation of voters in the referendum was at 62,7%.
Publicly both the British government, as well as the IMF, seem to have mellowed in their rhetoric and ready for a compromise in their demands.
However, after everything that has gone on before, I wouldn´t even trust them to tell us the correct time.
The British as well as the banking elites have in the past always followed two tactics at the same time. They smile and shake hands above board, and then kick those they deem weak and still not submissive enough below the table with spiked boots, while denying any responsibility for the harm they inflict. (Their spikes constitute either economic attacks or black-op intelligence operations)
As for the home-front, there had been a relentless campaign against the referendum from the very day Icelandic president refused to sign the law for the debt-take-over.
In the most widely viewed comedy program on the main publicly owned TV-station the president was portrayed as an idiot responsible for the country to burn down, while his wife was portrayed as an imbecile, and the Icelandic people, who had signed the petition for a referendum, as too stupid to know their own mind.
In time there eventually were a few other voices to be heard on Icelandic media, but the government itself didn´t budge.
No matter what reasonable and respected voices had to say on the matter. The government opposed the idea of a direct democratic decision.
Until the last minute the government had tried to discourage the voters from voting. The Prime Minister and the Minister of Finance both said they would not participate in the referendum. They saw it as a “waste of money” and a “farce”.
This disregard for the very people who had put them into office angered just about everybody who is the slightest bit interested in politics here.
Personally I really do not understand why those two government officials did this kind of a stunt. Quite obviously they were hurting themselves and their political parties in this way.
The only explanation, I could think of, is that they were threatened with dire consequences to the nation, if the referendum went ahead.
The Icelandic referendum, the voice of the people against the blackmailing power of the international financial elites might now have become precedent for other countries in similar situations.
What the bankers seem to fear above all things is a direct democracy in financial matters.
And no doubt that´s quite a reasonable fear, for such a democracy would lead to more and more people getting informed about financial matters and the money-creation process itself.
The knowledge about this process coupled with the instruments of a direct democracy would lead eventually and without any doubt to a monetary reform and a loss of power for the international bankers.
The Icelandic government officials were doubtless under great pressure not to support this kind of a direct democracy here, but they were also surely under the very same pressure not to tell the Icelandic people the truth. And that´s why few outside the government could understand their attitude.
If there were early elections the opposition parties would most likely win now, although the largest opposition party, the Independence Party, was the one which is actually responsible for the whole mess of the Icelandic financial collapse. Their government first privatized the banks and then did not regulate those private banks in a sufficient manner,which would have prevented the bank´s limitless expansion abroad and by doing so taking enormous risks for the Icelandic economy.
Before 2003 the Icelandic banks had been in public hands(either belonging to the national state, or local communities or public organizations like the public pension funds). No needless risks were taken this way. The banks´activities stayed inside the country and in this way all revenues from interests were recycled back into the Icelandic economy. And with this revenue the whole of the Icelandic public infrastructure was financed, propelling the country from one of the most under-developed countries in Europe before 1944 to one of the most developed ones, enjoying one of the highest living-standards for the general population (not just for the rich)
But then the Icelandic government was persuaded by British “advisers”(mainly from the ultra-large British investment-bank HSBC) to privatize the banks and allow them to grow beyond Icelandic borders. This, according to the “advisers”, would bring foreign investment money into the country by which Iceland could then expand its hydro-electric energy market and create jobs in the more remote areas of the country.
In the last few decades more and more people had moved from there to Reykjavik and the surrounding population centers for lack of working opportunities elsewhere.
The Icelandic government-members like most other Icelanders were very trusting and naive people, and so they trusted their foreign “advisers”.
John Perkins called “advisers” like this “economic hitmen” – and he must know, since he used to be one of them.
I doubt that even a single Icelander (besides this blogger) had ever read the book before the banking collapse. And even, if anybody actually had read it, like me for instance, she wouldn´t see any connection between what Perkins described and the situation here. After all, we weren´t a developing country. “They” wouldn´t do this to us, would they?
Many have read the book in the mean-time.
Perkins actually came to Iceland telling us, that what had hit the country looked to him suspiciously like just such “economic hitmen”. And finally we realized that we all, the people of the developed as well as of the developing countries are basically sitting in the same boat, a boat that´s sinking because it has been torpedoed.
Well, to make a long story short, the government privatized the banks, foreign “investors” poured money into the banks allowing them to expand. And then, although the domestic economy was still booming and expanding, including export the growing industries, the “investors” pulled the plug and speculated against the Icelandic Krona in the beginning of 2008.
With the loss of value of the Krona the Icelandic banks became under-funded. Until September 2008 the Icelandic bankers tried to mend the holes with crooked and not so crooked methods. The director of the central bank ran around all of Europe and America begging and pleading to get some loans from other central banks. No luck there.
And when then in September Lehman Brothers went under, the Icelandic bankers could no longer refinance their old loans from other banks.
To ward off total financial collapse the government had no choice but to re-nationalize the banks, split off the domestic from the foreign parts and put the foreign parts of the banks through bankruptcy procedure.
This lead to Iceland being put on the list of “terrorism supporting countries” and brought on a near total international boycott of all financial transactions with the country.
When Icelandic retailers announced that they were about to run out of food, the Icelandic government, which then was still under leadership of the Independence Party, caved in and signed an agreement that the Icelandic state, the Icelandic taxpayer would “honor the obligations” of the private banks.
And, if Iceland could not make the payments in time, all of Iceland´s resources and infrastructure would then be liable to foreclosure, being taken over by the international bankers.
It was blackmail short and simple.
Since then, due to the collapse of the Krona, many companies have buckled under the burden of foreign debts and already have been sold to foreigners. Other companies went under altogether.
Of the three banks the government had renationalized in 2008 two have been re-privatized already.
While this move was propagated by the media as “good for Iceland”, since now foreign money would be streaming back into the country, the reality is that those banks have just been handed over to the foreign creditors of the old banks to pacify “the international community” (code-word for the international bankers, the IMF, the World Bank and the BIS).
Landsbanki is the only bank still in state-ownership, since it is settled with the Ice-save debts.
Iceland as a nation has lost most of it´s economic independence already. Many Icelanders are up to their necks in debts (debts which had once been reasonably low and easily payable before the attack on the Krona and it´s collapse).
Taxes have been raised by nearly 30% while spending for health and education services have been cut severely as well as for infra-structure projects.
For weeks now, the government has been in new negotiations with the British and Dutch government over new payment conditions mainly in an attempt to preempt the referendum and make it obsolete.
No agreement has been reached so far.
Legally seen, however, according to European law the Icelandic nation does not even owe those Ice-save debts at all. If we could find an European court that wasn´t acting as a kangaroo of the international bankers, Iceland would most likely win the case against the British and Dutch governments.
Alain Liepitz, French member of the European Parliament, member of the International Trade Commission and expert on the European banking laws wrote in an article (and stated on Icelandic TV):
….To open branches in the European Union the Icelandic banks had to meet the requirements of European directive 94/19 which requires each country to set up a “Deposit Guarantee System” (DGS). This is a national insurance fund which is financed by levies taken off deposits and designed to guarantee deposits of up to a maximum of 20,000 euro per person. The Icelandic DGS only covered some of the banks’ liabilities but it was considered that all of the banks could not lose all of their assets all at the same time.
Was the Icelandic DGS particularly weak? Was it, perhaps, especially poorly supervised? This was not the view of Richard Portes, head of the Royal Economic Society. In an official report dating from 2007 he wrote:
« The institutional and regulatory framework appears highly advanced and stable. Iceland fully implements the directives of the European Union’s Financial Services Action Plan (unlike some EU member states) »
Such was the “well informed wisdom” of the financial community, an assessment offered to the public by one of its most prestigious representatives, Nobel-worthy and British.
We know today that this international community, its representatives and its 3 rating agencies got it completely wrong. In September 2008 the world economy of debt collapsed. The refusal of the US government to bail out the Lehman Brothers bank made the situation worse. If the State didn’t intervene all of the banks would go under. And so every State in the world rushed to the rescue of their big banks, and to avoid the onset of panic, extended the deposit guarantee with sovereign power at home, that is, both to nationals and to residents.
The Bank may well be a collection of private institutions but it is also a “Service of General Economic Interest” which means that if it doesn’t work then currency, a public good par excellence, won’t circulate.
Iceland followed suit and was one of the first to do so. Was its DGS too insignificant to genuinely guarantee deposits? The Icelandic government extended its guarantee to home depositors but it didn’t have the means to rescue its banks with massive loans like the big countries. The British government then took two major steps: it seized Icelandic financial assets and offered its guarantee to Icesave’s British depositors. The Dutch government did likewise.
First question: Were these three governments legally obliged to extend their guarantee over and above what the DGS could pay to cover the deposits in the Icesave accounts? On this point the European directive governing the issue (94/19/EC) is perfectly clear: no!
« 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 DGS (…) have been introduced and officially recognized. »
And it is easy to understand why. A DGS is an insurance scheme between banks which protects debts into which banks contract with their depositors and which is funded by contributions from these contracts themselves. To say in advance that public authorities would “cover” incidents like a free open-ended insurance policy would first of all reward banks for their careless behavior (a paradox called “moral hazard”).
It would also reward the bigger countries who are better able to cover their banks with taxpayers’ money (not just depositors’ money). That would be contrary to European norm of competitive “level playing field”.
Finally and above all, using taxpayers’ money to pay a private debt to which taxpayers themselves are not a party constitutes a serious attack on private property: the revolutions of Modern Times (English, Dutch and French) sought to put such serious decisions strictly within the control of the citizens.
I was shadow reporter for the Greens in the European Parliament at the time of the two amending directives to 94/19/EC. At no time was there ever any question of going back on the fundamental principle of public non responsibility for private debts.
The Icelandic, British and Dutch governments were obviously exercising their right when supplementing the insufficiencies of local DGSs. Once the crisis had started, it was indeed their duty to do so for reasons of public order and social and economic stability. But it was a sovereign decision, subject to their rules of internal democracy…..
….the British and Dutch – had had their doubts about Icesave and had considered that the deposits of their residents were more effectively guaranteed at home than in Iceland, what did they have the right to do as Icesave’s “host countries” ?
The answer is set out in directive 94/19 and is specifically dealt with in the guidelines in its Annex II.
”Host Member State schemes will be entitled to charge branches for supplementary cover on an appropriate basis which takes into account the guarantee funded by the home Member State scheme. To facilitate charging, the host Member State scheme will be entitled to assume that its liability will in all circumstances be limited to the excess of the guarantee it has offered over the guarantee offered by the home Member State.”
In short, the host country can offer supplementary cover to the guarantee and to do this is entitled to require a local branch to make contributions in the host country in addition to the payments made in the country of the bank’s headquarters. In reality the British and Dutch authorities never wished to limit Icesave’s capacity to offer particularly high rates of interest to their depositors but by taking more risks. These authorities, therefore, had a duty to warn these depositors and bore the civil responsibility of not having imposed the complementary measures envisaged by the directive (an excellent way of limiting the off-shore perverse risks!)
As rapporteur in 2001-2002 for the directive on “Prudential supervision of financial conglomerates,” I had the European Parliament adopt a generalisation of this “principle of main host country” by stating that the authorities responsible for monitoring a transnational group were automatically those of the host country of the main activity within EU. In the case of Icesave: Great Britain, which was right to reimburse its depositors but wrong to subsequently turn against Iceland….
But I suspect in the naive “availability to repay” of many Icelanders and their representatives, a sort of guilt: like a divine punishment after years of the delusion of easy money. I say calmly to this strong and courageous people: You are neither legally responsible nor morally guilty for the base acts of internationalised finance.