So, why is it in the best interest of all the Icelandic people to collectively divert a portion of their future earnings to repay the British and Ductch governments for amounts that those governments unilaterally advanced to thier own citizens, after those citizens made thier own private decisions to invest thier own private funds in a private offshore Icelandic bank?
Nonsense. Trade is a 2-way process. Presumably the rest of Europe still wants fish. It will all be forgotten in time, Europe will lend them money again. Bankers have short memories, remember? There's only 350k Icelanders anyway. What if the productive people all said, we're not going to pay the debt, we're emigrating to Canada? Who's going to pay the debt then?
Because, as I have repeatedly mentioned, the Icelandic govt, on behalf of their people, signed up to an EEA law that mandates a certain minimum level of depositor protection. The Icelandic parliament signed this EEA regulation into national law. If Icelanders decide to renege on the Icesave deal, they're breaking both EEA and Icelandic law, which, while convenient for them, should have repercussions.
The British and Dutch Govts didn't unilaterally advance funds to those savers. It was done as part of an agreement with the Icelandic Govt. But yes, Iceland may decide to say, "So long suckers!" But doing so will not be cost free like so many here seem to be saying. Putting aside any other measures, how will Iceland get into the EU if it doesn't honour those obligations? Britain and Holland will have an effective veto on its entry after all. For a country like Iceland, EU membership is huge.
Are you saying that iceland has the power to "threaten" the EU with a fish embargo? Oh I get it. You're joking right? Do you not see the political-economic implications? If this were simply about what rate of interest Iceland can lend money then this would be a no-brainer. And, Britain and Holland wouldn't have made the deal with iceland that they did. They judged that they have enough leverage over iceland to compel it to honour its obligations. I think Iceland would have bigger issues than whether they pay this debt or that debt. They wouldn't be able to pay any debt at all. Is there a rationale to this point? I don't see it.
I think he has a point with the population numbers though. 350K people? That's frighteningly little really considering the amounts of money talked about.
Ok, let's say Iceland says f*** off, we are not paying anyone anything. What are the consequences? The UK govt sends the British Navy to sort them out? No chance. The EU declares economic sanctions against Iceland? No chance. The UK declares economic sanctions against Iceland. I doubt if Iceland would care less. Unless someone can state what would frighten the Icelanders to pay up, I would advise those 350k (a medium sized town in the UK?) not to bother.
Was it Russia (?) or some Scandinavian country (I believe so) but some country offered the entire Icelandic population to immigrate as a whole many years ago but the declined the offer.
Martinghoul, you always have responsible comment but I am not sure your conclusion about Iceland being bound by its membership in the EEA is accurate. EU law by its nature is never clear and is always open to a great deal of flexibility between the Commission directives and the individual member implementations. Please see a recent policy paper on this issue here: "www.voxeu.org/index.php?q=node/4611". I think Iceland is on firm legal ground claiming that its agreements under the EEA do not apply to a complete systemic banking collapse. The fund that was set up in compliance with the EU relevant directives was only 1% of deposits. By its very nature it could never cover a systemic loss. The internet investors in the EU and Holland were buying hot CD's at high rates from a foreign bank that was not part of the EMU and its central banking back up. These CD's were in amounts of 50,000 pounds or more. These people must be seen as sophisticate enough to assess the risk. It was clear that credit default swaps on this debt were falling for months before the collapse. The idea that the U.K. and Holland decided to use taxpayer money to reimbures these high flying investors is certainly open to criticism. As far as leverage over Iceland to join the EMU...well, the way things are going Iceland might want to reconsider how much it will help them. Its looking more and more like a debt sharing program than an economic booster. Maybe they should make an Arctic oil lease deal with a Chineese Oil company and then link their currency to the Yuan.