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Quick Icelandic banking redux

January 5, 2010 29 comments

Just for the avoidance of doubt:

1) the democratically elected Icelandic government, under EU/EFTA financial regulation equivalence rules, agreed long before the crisis even began that it would guarantee compensation of the first EUR20887 of deposit to retail depositors in Icelandic banks from other EU countries.

2) the Icelandic banks, with explicit permission from the democratically elected Icelandic government (as part of the economic boom that vastly enriched Icelanders for many years), actively marketed their savings accounts to depositors from other EU countries.

3) The Icelandic banks then went bust and lost their depositors’ money.

4) This means that, unequivocally and in every possible sense, the Icelandic government is responsible for paying the first EUR20887 of compensation to retail depositors in Icelandic banks from other EU countries. They agreed to take on that debt, and retail depositors in the Icelandic banks made the deposits on the basis that the Icelandic government weren’t a bunch of ropey shysters who’d refuse to pay debt that they owed.

5) For understandable reasons of domestic harmony, the governments of the UK and Netherlands (where the majority of Iceland’s victims were located) agreed to pay the compensation themselves, and subsequently chase the Icelandic government for the money it owed.

6) Today’s populist refusal by Iceland’s president to pay the UK and Netherlands government the US$5bn it owes as a result, despite the extremely generous payment terms they’d been offered, represents every single Icelandic person nicking more than US$10,000 from British and Dutch taxpayers.

If that’s democracy, screw it.