Iceland will hold a referendum on April 9 to vote on a repayment plan for around 4.2 billion dollars, a claim disputed by the governments of Britain and the Netherlands. The Icelandic President, Ólafur Ragnar Grímsson triggered the vote last month after vetoing a revised scheme to repay cash after the collapse of Landsbanki, an Icelandic private bank, and it’s internet bank Icesave, that offered depositors high yielding deposit schemes.
On October 9 2008, Britain’s Chancellor of the Exchequer, Alistair Darling used anti-terrorism rules to take control of assets held in Britain by an Icelandic bank. Alistair stepped in to protect deposits made by UK residents in the Reykjavík based Landsbanki, which the government of Iceland had seized the day before. Not only did the government of the former Prime Minister, Gordon Brown wield the anti-terrorism rules against the private bank, but they also chose to use it against the whole Icelandic economy for good measure, with disastrous consequences; crippling imports, exports, banking, and private business. This was economic terrorism at its worst, resulting in a total meltdown of the Icelandic economy.
Iceland is a small North Atlantic military-free island nation and one of the founding partners of NATO along with the United States of America, United Kingdom, Netherlands and others. Just this act alone, imposing anti-terrorism rules on a fellow NATO member, is a dirty trick that has to have consequences. There is no doubt that by their actions the British Government took over responsibility away from the Icelandic government for Landsbanki and its internet saving-scheme, Icesave. The British government closed the bank down and took it upon themselves to reimburse the depositors in full.
Why should the British government demand a payment from the Icelandic taxpayers for their own political grandstanding? At the same token, shouldn’t the Dutch, who have a similar Icesave problem stemming from the British anti-terrorism enforcement, make their financial claim for their Icesave reimbursement “loss” on the British?
It is illegal in the European Union to government-secure private banks’ obligations. It is against the principles of the European Union to subsidise a private enterprise, therefore the Icelandic government would be breaking the law by agreeing to pay, using taxpayer money, this disputed claim. The bankruptcy estate of Landsbanki should be responsible for this claim, not the Icelandic public. It is also in breach of article 40 of the Icelandic Constitution, for the Icelandic Parliament to indebt its citizens for an unknown amount that could jeopardize the financial future of generations to come.
It would be “poetic justice” of a sort if the Icelandic nation would say “NO” to the ‘Icesave Agreement’ in the referendum. This would be a step towards a cure for the average, long-faced taxpayer. “NO” is a two-letter word, but in this case, it is a short and sweet answer to the frequently asked question of “moral hazard”.
Guðmundur Franklín Jónsson is an Icelandic citizen.