Should Iceland compensate the UK and Netherlands for Icesave’s collapse?
In 2008 the bank Landsbanki collapsed along with its Icesave counter part, the bank was then nationalised. Many Dutch and UK customers had to be compensated by their national Government and now these Governments seek compensation from Iceland. Whilst the Icelandic Parliament voted in a bill to pay out £3.1bn between the two Governments the President has since rejected it holding that it should go to a referendum, how should the Icelandic public vote?
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Governments need to take their own responsibility for the recession
Almost every country in the world has felt some ripple effects from the recession and each Government needs to take responsibility for its own demise. Landsbanki has been nationalised and therefore it should have been the Icelandic Government that compensated Icesave account holders not the customers’ national Governments. Iceland needed to keep the bank afloat in order to stable Iceland’s own economy. It is not fair that this action has lead to the British and Dutch governments having to bail out Iceland of its debt.
The UK is now in severe debt
The government of the UK is now in nearly £800 billion debt. They have had their own banks to bail out, and it is not fair that they should also have to deal worth the shortfall created by a, now national, Icelandic bank who left several thousand UK customers out of pocket. Both the UK and the Dutch Government paid these customers compensation, and now a deal should be reached in order for Iceland to pay back the debt. The UK especially could do with the money as their debt now exceeds 55% GDP and this is showing no signs of decreasing any time soon
The UK is a pretty stable economy in comparison to Icland, despite the huge amount of Government debt owed by Britain. Britain has the ability to structure its borrowing whereas Iceland has had to rely on the good nature of its Nordic neighbours in order to gain enough money to keep their economy afloat. There is a difference between the two debts and given the extremely high population of Britain compared to Iceland, a recovery for the UK is more feasible than for Iceland. Therefore, Britain should let Iceland off the compensation out of goodwill and understanding.
Their entry into the EU will not be as smooth.
Iceland’s international reputation will be ruined if they fail to pay back the UK and the Netherlands, and soon. Being part of the EU has several economic benefits which would favour Iceland. They would be part of a trading community which will see their economy grow and they will be entitled to many benefits such as the Common Agricultural policy whereby farmers will be remunerated for their farming efforts. The accession into the European Union will be severely halted by Iceland voting against compensating the UK and Dutch Government. Whilst the Icelandic government may find it hard to compensate the Governments, they will find it harder in the long run if they do not join the 4EU.
This is assuming that the Icelandic public still want to be a part of the EU any more. The whole recession and the incidents between other countries such as the UK and Netherlands has left the Icelandic public rather bitter about having any international relationship with Europe. They have in fact been reported to have grown bitter towards free capitalism and instead would prefer a more traditional Icelandic way of life. Given this attitude, why should they care as to whether their accession into the EU is quick or not. The time is something they need to decide which governmental direction to take when it comes to running their own country.
They borrowed money on the condition that a deal would be reached.
When the bank collapsed, Iceland had to borrow billions of dollars from the International Monetary Fund. This loan was made under the condition that the issue as to compensation was resolved. With the UK and Dutch government both arguing that they deserve the compensation, no resolution is likely to be made unless the Icelandic public approve the banking bill put forward and approved by Parliament. The IMF could well decide that Iceland need to pay back the billions lent to them sooner rather than later whilst a resolution is still not achieved.
The Icelandic public should not pay for the mistakes of a bank
In Britain we are often complaining about how the tax payer bailed out the banks, then the banks are still not being fair with overdraft charges and then they are still paying out pension funds and high bonuses. This is a real gripe with the British public, but there are a lot more British citizens than Icelandic ones. In Iceland the population is only 300,000; wider London has a population of 7.7 million! Therefore the cost per tax paying head is a lot greater in Iceland. The Bill that Parliament has proposed and the one that will go to the referendum will give away £3.1 billion to the British and Dutch Governments. This totals at just over £10,000 per Icelander! Given that we the British do not like having to bail out bankers, surely we can see that paying out that much of taxpayers money per head is wrong to cover up the mistakes of the bankers.
What do you think?