The cost to Icelandic households if the current Icesave measure is passed could be a total of 2 million ISK per family at most.
The current Icesave agreement reduces interests rates from 5% for both countries to 3% for Holland and 3.3% for the UK, costing the government some 50 billion ISK (about 328 million euros). According to the official summary of the agreement, “Liability of the state is limited as far as possible and in fact solely limited to (a) payment of interest as it accrues until June 2016, and (b) the portion which has not been recovered from the bank’s estate after that time (the shortfall)”. Most of the debt is going to be paid from Landsbanki’s estate until the end of June 2016.
This indicates that there will, in fact, be some cost that must be covered by the state, and this would be derived from tax revenue.
Morgunblaðið, going by data compiled by the parliamentary finance committee, shows that in the worst case, by the time payments begin in April 2012, the crown will have weakened by 2%, and Landsbanki’s assets will reduce by 10%.
In the best case scenario – wherein the crown strengthens – the total cost to each household will be about 370,000 ISK. If the crown remains unchanged, each family will pay around 550,000 ISK. A weakening crown could lead to total costs per household reaching up to 2 million ISK.
It should of course be kept in mind that this tax burden would not be paid all at once, but over a period of years.
In related news, Eyjan reports that economics professor Ólafur Ísleifsson considers it strange that former Landsbanki managers are not being sought after for their assets before costs are passed on to Icelandic households. He mentions former Landsbanki CEO Björgólfur Thor Björgólfsson, for one, who still has plenty of capital. Ólafur reiterates a common refrain in Iceland right now: that taxpayers should not be paying for the damage incurred by private businessmen.
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