Hér er fréttin öll međ öllum stađreyndavillum..

T.d. fullyrđir höfundur ađ atvinnuleysi sé ađ minnka á Íslandi?

Einnig ađ krónan sé ađ bjarga efnahaginum á íslandi, ég get ţví miđur ekki séđ ţađ í mínum heimilsrekstri ađ efnhagur minnar fjöldskyldu sé ađ batna.

Vegna krónunar skuldum viđ sennilega núna 4 falda árstekjur okkar hjónanna en skuldađi "einungis" 2 faldar árstekjur fyrir hrun.

Iceland deal sets interesting precedents

By John Dizard
Published: December 5 2010 09:06 | Last updated: December 5 2010 09:06

I understand from people close to the negotiations between Iceland and its official claimants in the “Icesave” dispute, the UK and the Netherlands, that a settlement will be announced in the next couple of weeks. The settlement will be on terms far more favourable than one that was proposed back in March, and rejected by the Icelandic voters in a referendum. This could have effects far beyond Iceland.

There is no doubt that the failed Icelandic banks, whose offshore deposits in the UK and the Netherlands were covered by those countries’ authorities, did a bad job. The question in the Icesave dispute was the responsibility of the state for covering all the liabilities of an insolvent banking system, as distinct from an insolvent bank, or banks, whose deposits could be covered by solvent national deposit insurance schemes. The Icelanders had their position on that point; the UK and the Netherlands disagreed, and the Icelanders were prepared to go through with litigation to determine who was right. The Icelandic bank bondholders as distinct from depositors, will have to wait to get a partial payout on their losses.

One of the reasons the Icesave dispute will be settled, rather than litigated, is that European authorities do not want a definitive, Europe-wide answer to that deposit-insurance-responsibility question, or at least not yet. You can add that can to the rubbish-bin-load that is being kicked down the road.

Iceland was supposed to be the cautionary tale for euro-area countries caught in banking and fiscal crises. Errant governments and electorates were told that if they didn’t guarantee bank bonds, pretend to respect the Stability and Growth Pact, and listen to the wise men from Brussels and Frankfurt, they could end up like the Icelanders.

The problem for the tellers of this tale, in places such as Ireland, is that things have been working out much better for Iceland than for the peripheral euro members. Unemployment did shoot up in the wake of the 2008 financial crisis, but is now a bit over 7 per cent, and falling.

The currency devalued by about half in the wake of the crisis, which has led to a trade surplus. There are still capital controls, but an Icesave settlement, and reserve accumulations allowing for an eventual payout on so-called Icelandic krona “glacier bonds”, will lead to those being lifted, probably next year. There are still outstanding problems, of course.

Now if no one outside the country knew, or took note of, Iceland’s gradual recovery, this wouldn’t matter much. But Greeks, Irish and Iberians read newspapers and websites, and some of them, and the politicians who are supposed to answer to them, wonder if there isn’t another way to run an economy.

There are counter-arguments to using Iceland as a model for a systemic solution to the problems of troubled euro-area countries. Bank bondholder losses in the euro area have moved from the nearly unthinkable six months ago, when this column first advocated them for Anglo Irish, to orthodoxy today.

However, managing these in highly developed financial markets is much trickier than it was in Iceland, which can get by with a much simpler system than would be needed in core Europe. Still, it has to be said that European authorities have managed at each stage of the crisis to find the worst possible way to handle this issue.

The other way Iceland offset the crisis-induced contraction – devaluation – is less fruitful as more countries adopt it. The Swedish emergence from a banking crisis in the early 1990s was possible in part because the country is not that big, and was able to hitch on to a growing world economy with increased competitiveness. If all the current account/primary fiscal deficit euro members tried to do that at once, there would probably be a degree of mercantilist cannibalism. So the Icelandic/Princeton Economics Department solution may not be a universal one.

By the way, before European leaders talk up the first bond issue of the European Financial Stability Facility, they should take a look at the underlying documentation. In this newspaper last week, some eminent euro-worthies penned an opinion piece advocating “the transformation of the EFSF into a permanent European instrument”.

However, the lawyers for bond buyers will note that the legal authority for the EFSF bond is from Article 122 of the Lisbon Treaty, which says that financial assistance can only be provided to a member country “which finds itself in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional circumstances beyond its control”.

Sorry, were you saying that those conditions should underpin a “permanent instrument”? Perhaps sticking to a three-year timetable would be better.

johndizard@hotmail.com


mbl.is Icesave samkomulag áhugavert fordćmi
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Athugasemdir

1 Smámynd: Sigurjón Ţórđarson

Viđmiđiđ eru ekki íslensk heimili heldur gengur betur hjá kröfuhöfum ađ innheimmta skuldir en gert var ráđ fyrirr

Sigurjón Ţórđarson, 5.12.2010 kl. 12:08

Bćta viđ athugasemd

Ekki er lengur hćgt ađ skrifa athugasemdir viđ fćrsluna, ţar sem tímamörk á athugasemdir eru liđin.

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