May 25<\/p>\n
Dear Mr. Stagliano.
\nThank you very much for your e-mail. I am more than willing to help in any way I can to cover this story.
\nUnfortunately I am abroad and will not be available for an interview during the time you plan to be in Iceland. I can therefore only be of help if you submit your questions to me by e-mail. You are most welcome to submit your questions. You could also consult my homepage: www.jbh.is – where you will find some stuff in English, highly relevant for your topic.<\/p>\n\n\n\n\n\n
There is a tendency in the foreign press to speak about “the Icelandic way” out of the crisis. What was the Icelandic way?
\n(1) That tax-payers refused by referendum to pay the debts accumulated by the banks.
\n(2) That the government devalued the kr\u00f3na (the national currency), thus strengthening competitive position of Icelandic exports (inducive for economic growth).<\/p>\n
But those are merely half-truths and highly misleading.
\n(1) The whole financial system went bankrupt. There was no way the Icelandic government could do anything to bail it out. The Central Bank\u00b4s foreign currency reserves were empty. Access to financial markets was closed. Icelandic government bonds were rated as junk. The bank system\u00b4s foreign currency debt was roughly tenfold Iceland\u00b4s GDP. Foreign creditors (mainly German banks) wrote off two-thirds of the debt and sold it to hedge-funds at fire-sale prices. Those financial predators are now the owners of two of the major banks, trying to cash in on their claims. (2) Devaluation of the national currency (ca. 70% ) – although helpful for exports – doubled foreign currency denominated debt. Ca 60-70% of companies were technically bankrupt and at least a quarter of homeowners could no longer service their mutated debt.<\/p>\n
The foreign news tale that the Icelandic public simply refused by referendum to take upon themselves the bankers\u00b4 debt is unfortunately not true. Indeed, a majority by referendum rejected a negotiated settlement with the Brits and the Dutch on how to cover the minimum deposit guarantee (by EU regulation) for the branches of Icelandic banks in those countries.
\nBut the debt did not disappear. By rejecting the negotiated settlement, the matter is now before the courts. The ESA has concluded that Iceland is in breech of the EEA agreement.
\nThe matter is now before the EEA Court. IF Iceland loses, it will mean litigation by all those who have a case against the branches of the Icelandic banks in UK and Holland. If they win, Iceland will be forced to pay a lot more than the negotiated settlement was all about. The main point is: The Icelandic referendum only rejected a negotiated settlement (which was in fact very positive) and referred the conflict to the judiciary.
\nIn my view this was a mistake. The ultimate proof will only be presented by the courts in due course. Fortunately, the fallen banks\u00b4 assets seem to be able to cover the minimum deposit guarantee. That\u00b4s what the settlement was about. It would therefore not have cost the Icelandic taxpayers a penny. No one knows what future litigation will lead to. The evidence looks like ending up being much more expensive for the Icelandic taxpayers than the negotiated settlement that was rejected by referendum.<\/p>\n
So, the story is not simple, but nonetheless, there is a lot of truth in the story that the way Iceland handled the crisis has several lessons for others: The bail outs of Ireland and Greece were not for those countries. They were for their creditors (predominantly Germans banks). Neither Greece nor Ireland will be able to pay those debts. The euro-area is by now a total fiasco.
\nIt is a matter of fundamental economics that you cannot run a monetary union without (1) a common central bank which is a lender of last resort for all member states and (2) the issuing of state bonds to be the responsibility of a central authority. (3) You must coordinate both fiscal and monetary policy.
\nTo be in denial of those basic truths – as Mrs. Merkel and the Germans certainly are – means that the euro project will fail. President Hollande is absolutely right in his proposals for the ECB\u00b4s right to print money (quantitative easing), solidarity for common euro bonds and fiscal and monetary coordination.<\/p>\n
Who has profited most from the euro project? Answer: The Germans. Who stands to lose most, if the project disintegrates? Answer: The Germans.
\nIt is miserable to observe the absence of real political leadership in Germany these days. Chancellor Kohl\u00b4s M\u00e4dchen has not lived up to it. Ten years ago Germany was the sick man of Europe. It was Chancellor Schr\u00f6der who sacrificed his political future by implementing agenda 10: The restructuring of the fiscal and the labor market in Germany which engineered their competitive strength. Mrs. Merkel inherited this boom. She has not pioneered anything. She has no authority to lecture others on anything. President Hollande is absolutely right in insisting on a growth pact. I hope your Mario Monti, who has an excellent record as an EU commissioner will support president Hollande in pushing through a new strategy for growth.<\/p>\n
Sincerely yours,
\nJ\u00f3n Baldvin Hannibalsson<\/p>","protected":false},"excerpt":{"rendered":"
A\u00f0sto\u00f0arritstj\u00f3ri La Repubblica , sem er eitt helsta dagbla\u00f0 \u00cdtal\u00edu (vinstra megin), Sr. Stagliano, beindi til m\u00edn spurningum um hina meintu \u201c\u00edslensku lei\u00f0\u201d \u00fat \u00far kreppunni, en hann var a\u00f0 undirb\u00faa fr\u00e9ttask\u00fdringu um \u00feetta efni \u00ed bla\u00f0 sitt. Sv\u00f6r m\u00edn vi\u00f0 spurningum ritstj\u00f3rans fara h\u00e9r \u00e1 eftir \u00e1 ensku.<\/p>\n
The deputy editor of La Repubblica in Rome, Mr. Stagliano, asked me a few questions about the so called \u201cIcelandic way\u201d out of the crisis \u2013 but he was preparing a report on this issue in his paper and came to Iceland for that purpose on May 25th. Specifically, he wanted to know if the crisis-stricken euro-zone countries (Greece, Italy, Spain, Portugal and Ireland) could learn some lessons from the Icelandic experience. What follows are my answers to Mr. Stagliano\u00b4s questions. <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1,9],"tags":[],"class_list":["post-1311","post","type-post","status-publish","format-standard","hentry","category-allar_greinar","category-greinar_og_vidtol"],"_links":{"self":[{"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/posts\/1311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jbh.is\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1311"}],"version-history":[{"count":3,"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/posts\/1311\/revisions"}],"predecessor-version":[{"id":2738,"href":"https:\/\/jbh.is\/index.php?rest_route=\/wp\/v2\/posts\/1311\/revisions\/2738"}],"wp:attachment":[{"href":"https:\/\/jbh.is\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jbh.is\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jbh.is\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}