With Friends Like the Brits, Who Needs Enemies?

"...Icelanders are primo, thievish; secundo, liars; tertio, arrogant; quarto, lice-ridden; quinto, drunkards; sexton, debauchers; septimo, cowards..."

"The Iceland Bell,"
by Halldór Kiljan Laxness

No, it is not the opening paragraph of the IceSave contracts between Iceland, Great Britain, and the Netherlands, but it might as well be. Last week, Iceland finally reached agreements with Great Britain and the Netherlands regarding the IceSave debacle, under which Iceland will pay Britain and the Netherlands $5.3 billion over the next 15 years at 5.5% interest rate, indebting every woman, man, and child in Iceland to the tune of $16,000.

The single event that has angered Icelanders the most since Iceland's recent financial collapse was Great Britain's decision on October 8, 2008, to invoke its anti-terrorist legislation against Iceland.

Landsbanki, one of Iceland's three large investment banks, had solicited funds from British and Dutch consumers by offering high-interest internet savings accounts through its online IceSave program. When a run began on Iceland banks, its financial authority placed Landsbanki in receivership on October 7th.

However, after public remarks that evening by the head of Iceland's Central Bank and private remarks by Iceland's Finance Minister Árni Mathiesen to the British Chancellor of the Exchequer Alistair Darling indicated that perhaps only domestic accounts would be insured by the government, British authorities froze Landsbanki's assets--in effect, calling the Icelandic government a terrorist organization, since it controlled those assets on that date.

Great Britain allegedly held up the International Monetary Fund's (IMF) loan to Iceland, as well as disbursement of the second tranche of the loan until Iceland agreed to reimburse its citizens for their IceSave losses.

It is hard to imagine that much real negotiating produced this agreement; to begin with, Icelanders don't have any experienced negotiators, and here we're dealing with age-old colonial overlords. We've been pushed into a corner and told, these are the rules. The 5.5% interest for a loan this high is exorbitant; at the very least, the interest rates demanded of Iceland should be the same as the British and Dutch shell out on their own foreign debts.

Now, there are logical arguments that can be made to justify the IceSave agreements. Yes, there may be sufficient Landsbanki assets in England and Holland to cover savers in those countries, so perhaps the risk to Icelandic taxpayers is minimal. (By the way, Landsbanki's former owner, Björgólfur Thor Björgólfsson, has an address in London, a luxury lair courtesy of Iceland's unwashed masses - you want money, go after him! And who was working in these Landsbanki branches in England? Where are these people, what is the responsibility of the obnoxiously overpaid directors who worked there or anywhere else in this gigantic swindle factory?)

A play on the Landsbanki's ads for the Icesave accounts, "starring" former bank owner Björgólfur Thor Björgólfsson. Image credit: Birgir R. Baldursson, www.tv1.is

Yes, the agreements were probably necessary to obtain the IMF funds and to avoid having Iceland's sovereign debt rating slip to junk bond status. And, certainly, holding Iceland's financial regulators responsible to outside authorities may tame the nepotism and incompetence that characterized those offices while the banking bubble grew.

So it is possible to argue that this is a reasonable thing to do. England says, we're not going to do business with you if you don't show responsibility. We got screwed by you, give us our money. That's not out of line, and one can understand the anger of depositors who lost their money, but having said that, they're not showing a lot of compassion for Iceland's suffering either. And when it is the government that's feeding this bully attitude, like invoking anti terror law against a military ally based on a couple of conversations with a few muttonheads, that is completely out of line!

The Icelandic government doesn't seem to have considered any alternative solutions. Some experts believe the invocation of the anti-terrorist law was a violation of the EEA Treaty and the UK by using these illegal means to seize the property of Landsbanki thus overtook the obligations of the bank. But the Icelandic government doesn't want to go to court - probably too much dirty laundry that cannot stand the light of day.

And why haven't we heard anything about America, Iceland's old ally? Iceland allegedly asked Russia for help, whose only interest in Iceland was as a money laundering center, but the only thing I've heard about recent US-Iceland relations is that at last April's NATO summit, President Obama expressed his wish to visit Iceland and spoke with the foreign minister about collaborating on producing renewable energy sources and "green" jobs. Has Iceland followed up on this or extended its arms, asked for aid or help in the form of say expert advice (I say, let's get Eliot Spitzer on that team of expert prosecutors!). Not to expect miracles, but at least the US doesn't have it in for the Icelanders like the British do.

The anger that has been simmering among Icelanders since October 8th exploded when the agreements were announced. A Facebook group denouncing the Icelanders who negotiated the agreements as traitors has garnered over 33,000 members. There have been regular demonstrations before the Alþingi urging legislators to reject the agreements. Allusions to the terms imposed on Germany after WWI have been made.

It has not escaped anyone's notice that no such terms were sought against the United States due to Lehman Brothers' removal of assets from England immediately before its collapse in September 2008. America, of course isn't on the hook for Lehman because it cannot be bullied around, but little Iceland can be browbeaten into submission. The British bully us because they can. The disregard for Iceland's sovereignty evokes memories of England's blatant disregard for Iceland's claimed territorial waters during the so-called Cod Wars of the 1970s.

Coincidentally, the other major issue currently before the Alþingi is the ruling Social Democratic Alliance's call for a referendum authorizing Iceland's application for membership in the European Union.

England's continued disrespect for Iceland's sovereignty makes me question why exactly Prime Minister Jóhanna Sigurðardóttir believes that membership in an organization dominated by Great Britain would be good for Iceland. We are, in their eyes, a second-class country (at best), to be bullied into submission whenever our interests conflict with theirs.

Does she imagine that British fishermen will not push for access to our fisheries, despite their complete failure to properly regulate their own fish stocks? Does she truly believe that our voice will be heard on important matters?

What proof is there that we won't be treated like a bunch of hillbillies (which is how we are now being treated)? This is how they treat us now, and their past dealings with Iceland frankly are not encouraging. England with America sets up an air force base in WWII, to protect themselves; then they come in the 70s and steal our fish until they're forced to stop. Then they make sure Icelandic banks go under, next they go after the banks, and after that, the government. Why in the world would we want to join an organization with people that treat us like this? What makes Jóhanna think things will get better?

Deal or no deal, I must say I am pessimistic about our future. To quote Laxness again, right now I have visions of "starving Icelanders remove their shoes and cut pieces of them into their mouths like pancakes."

Follow Iris Erlingsdottir on Twitter: www.twitter.com/elluskott

Comments

[Norge]

You will know who your friends are when you have no money left.

[LMPE]

Can we just cancel the whole world economy and start over?

[ry-guy]

It’s hard for me to feel sorry for Iceland. A little island containing 300,000 plus people made the decision to play with the big boys fast. It’s hard to respect a country like Iceland after what happened last year. If they would have been more careful, they could have become something really special.

I’m an American who respects countries like Japan. Through careful planning, hard work and strategy, the Japanese learned and mastered the businesses and technologies to eventually become the dominating economic super power they are now today. They didn’t get to where they are now by making hasty decisions.

Iceland on the other hand jumped right into the water - thinking they could swim with the big fish. The self-proclaimed financial "Vikings" were arrogant and reckless. When the turbulence of the financial waves became too much for them to handle, it was too late.

Now I'm reading sad commentary in this article about how Iceland doesn't have experienced negotiators to go up against the "old-age colonial overlords". If this is the case, then Iceland had no business putting their country in this situation in the first place. As I said before, if you’re going to swim with the big fish, then you better be able to handle it if things go wrong.

If Iceland doesn’t have experienced negotiators protecting their interests, then shame on them. Life isn’t all sunshine and rainbows.

[mikesw]

If foreigners (say, Japanese) make risky investments in the US, is it the responsibility of US taxpayers to pay them back if things fall apart?

[ry-guy]

Trust me. We're paying for the risky investments in the US. Ever hear of AIG?

[WestNebraskan]

Why should the entire nation pay for the extravagant behavior of a few of its citizens? It's not fair that we had to bail out AIG et al., and it's not fair that the Icelandic people have to bail out JAJ and BTB. And why is England/Great Britain/UK letting these crooks set up shop in London?

Money is the only language Brown and his crew understand. The Icelandic republic doesn't have any, but the thieves do.

[ry-guy]

"Why should the entire nation pay for the extravagant behavior of a few of its citizens?"

The answer is they don't. However Iceland is in a precarous scenario. If they walked away from the problem entirely, then who in their right mind would ever invest in Iceland again?

Iceland is in a lose lose scenario. No matter what happens, nobody will ever take Iceland seriously ever again...

[Garioch]

Is it possible for you and others on here to figure out the difference between England, Britain/ Great Britain and the United Kingdom and then learn the correct context to use these names in rather than just treating them as some interchangeable pick and mix and pulling out whichever one happens to come to hand?
It's not that complicated but it does make a difference to what you are attempting to say and describe.

[TimDanMick]

How are people in other countries supposed to know the arcane differences in titles that the British confederation and its component countries use.
People in England use the titles incorrectly, even when talking of the regent and which Elizabeth she is, so why should an Icelander who at the moment hates the UK know any better.

[Sparki]

The REAL problem is not the $16,000, but the HUNDREDS OF THOUSANDS of dollars many borrowed to finance their cars and houses.

FACT: Iceland had the highest levels of consumer credit of any country in the world. Total *DOMESTIC* lending in Iceland peaked at 515% of GDP in Q1 2008.

And that was before the currency devalued by 40%. Assuming that much of it hasn't been paid back (fact), that people have maxed out their credit cards since (fact) and that Iceland's GDP has fallen (fact), Iceland's domestic debt likely stands well in excess of 1000% of GDP today.

There are good reasons for to be angry. But before you look beyond your shores, be angry with the large percentage of Iceland's population who indebted themselves up to the hilt by borrowing as much as they could. They gave scarcely a thought to how they would repay it, because all that mattered was covering the interest payments. Be angry with Iceland's bankers who issued the loans as fast as they could. They wanted their bonuses. Be angry with the friends of bankers, cousins of bankers or extended family members of bankers. All gleefully participated and cheered each other on to grant bigger and bigger loans to their friends, cousins and extended family members, where possible in foreign currencies to minimize interest payments.

Bang the pots and pans outside the doors of all of those people. Send them petitions. Wear T-shirts denouncing them. Let them know how you feel.

[Peterreeves]

Unlike most of your previous articles, this is poorly written. The British government had to use AT laws for expediency in order to stem the flow of funds out of the UK. This extrapolation and whinging about Iceland being arch terrorists is a distraction. The main issue is that the icelandic people were terrorised by criminals like BTB & JAJ who systematically raped the nation, and are now waging a propaganda war to discredit Eva Joly. How is it that JAJ sells £7m of Moss Bross shares owned by Baugur to Sir Philip Green and then within a few weeks puts down a 'personal' deposit of £7m to buy 365Media? By all accounts the Banks are still paying him huge amounts for 'consultancy'. Its a disgrace and pathetic! Iceland doesn't need Britain to bully it, as its managed to self mutilate itself so badly, and continues to amble along in a drunken stupor.

[peterg76]

It always starts with "laws for expediency" - one of the lamest pretexts in history.

[mikesw]

"laws for expediency" or just political expediency?