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A Frenchie travelling the world...

21 August 2009

Will we pluck the chicken or kill it?

Dear readers,

I have listened with disgust to many of the comments made in the UK and in the Netherlands about the so-called Icesave deal. This is a nasty piece of chauvinistic bullshit if there is one. Let's go back to the facts. In 2007 and 2008, many Dutch and British citizens (as well as most Icelandic people) subscribed to Landbanski saving accounts which were proposing extraordinary returns, far above the (then already quite high) market interest rates. Unfortunately for them, such rates could only be achieved through a semi-pyramidal scheme, part of the returns being funded by capital being invested by the new customers. Please note that each national group of citizens was also relying on guarantees from their respective national finance regulators. This lasted until the now infamous credit crisis burst, leaving thousands of people with virtually nothing left of their savings.

Obviously, these customers turned back to their state and activated the refund requests linked to the national guarantee. Some of them, however, had invested amounts in the Landbanski scheme that were higher than the national guarantee limit. They lost a lot of money, on top of the promised interests. Understandably, these citizens and the public organisations that had imitated them (regional councils, towns and other districts) were quite angry at the Icelandic banks for having failed them, despite the fact that they should probably have known better. There is indeed no such thing as a saving system which can deliver twice the market interest rate.

However, things became uglier. Hit by a triple bank failure (aggravated by the UK uncompromising attitude), the Icelandic currency lost most of its value and the Icelandic economy collapsed. Iceland new government and its citizens, understanding for the first time that their previous go-it-alone policy was not protecting them in times of crisis, decided to apply for EU membership. The reasoning is that the European Union, particularly its monetary aspects (the Euro), could protect them in the future from similar disasters. This was favourably seen by most EU member states (in normal times, Iceland would be a net contributor to the EU budget). But the UK and Netherlands, were both governments are in difficult electoral situations, facing strong populist criticisms, vocally requested that Iceland first reimburse the sums they had advanced themselves to their duped citizens. This is called the Icesave package deal and is currently being discussed by the Iceland Parliament, the Athling (the oldest Parliament in the world).

This is unfortunately probably going to derail the whole process. EU membership negotiations were already going to be difficult, due to a understandable worries from the Icelandic fishery sector. But the new British and Dutch exigences are enraging an already touchy Icelandic public opinion. And I can only give my support to the unfortunate Icelandic citizens. Why on Earth, when they are already down, highly indebted and suffering from a terrible crisis, should they be forced to support the costs of guarantees that were passed by other governments. Why should they pay for the misdeeds of a private bank which only happens to share a geographic situation with them. Why should they be asked to cover on their own money the risks taken by other people? Why should they in other words, pay for the greed of fellow Europeans? I see no ethical basis for this. I don't see any legal reason for this either. On the contrary, I believe that we should rather give a shoulder to fellow Europeans, especially at a time when everyone is suffering. That's what solidarity is for. That's what the EU is for: being stronger together, not screwing the weakest link...

6 comments:

contrarybear said...

I hadn't heard that (I haven't read the Economist in a while), and I agree with you that it's pretty ridiculous. I remember seeing those Ice-saver billboards in Holland a couple years ago. Saver beware.

thelord said...

lets be honest if it was you fuckin money you samrt arse what would you of done,lets be honest the french goverment would of done the same.

thelord said...

and wanker another thing our navy is bigger than yours as well that the uk navy wank breath

Alphast said...

Dear "thelord"
Do you realize you are answering a US and a French citizens? For your information, Jane's report (an authority about navies if any) places both countries' navies ahead of the UK Royal Navy.

Just so you understand...

Alphast said...

By the way, if it was my own money, I would not invest it in unsafe and unguaranted placements.

thelord said...

no dick head i said uk navy is bigger than the french navy i said nothing of the others you dumb frog hilly billy inbred