The long saga ends. The Vikings defeat Britain . . . again.

A few years back I got a lot of grief from commenters who contested my claim that it was not clear whether Iceland was obligated to cover the deposits losses of Icesave in Britain and the Netherlands.  Now the EFTA has ruled in Iceland’s favor:

Iceland unexpectedly won its legal battle to avoid being forced to pay back the British and Dutch governments for not honouring deposit guarantees for savers in Icesave.

The EFTA (European Free Trade Association) court on Monday dismissed all claims against Iceland, ruling that it had not breached the deposit guarantee directive because Iceland’s financial crisis was so big. It also held that Iceland had not discriminated between depositors in its own country and those in the UK or Netherlands.

Iceland reacted with relief after government officials had long been prepared for a defeat. “It is a considerable satisfaction that Iceland’s defence has won the day in the Icesave case; the EFTA Court ruling brings to a close an important stage in a long saga,” the government said.

The case arose after Landsbanki, the now collapsed Icelandic bank, attracted thousands of savers in the UK and Netherlands by offering high-interest accounts in Icesave.

Iceland had a bank deposit scheme in place at the time of its crisis, but the scheme did not have sufficient funds to pay out to depositors. After Landsbanki’s demise the British and Dutch governments paid the deposits of the savers themselves, and then demanded the money back from Iceland.

The Icelandic public twice rejected those demands in referendums, in part due to popular anger at how the UK in particular had behaved by using antiterrorist legislation in the dispute.

Iceland has nonetheless been repaying the British and Dutch governments. Officials in Reykjavik said Iceland has paid IKr585bn ($4.55bn) of the IKr1,166bn claims from Icesave, equivalent to more than 90 per cent of the minimum deposit guarantee the two governments were obliged to pay.

“It is expected that the Icesave claims will be paid out in full by the actual debtor, the estate of the failed Landsbanki,” the Icelandic government confirmed on Monday.


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4 Responses to “The long saga ends. The Vikings defeat Britain . . . again.”

  1. Gravatar of Steve Steve
    29. January 2013 at 11:15

    Speaking of old but good stories, here’s Krugman in Feb 2009:

    http://www.post-gazette.com/stories/opinion/perspectives/paul-krugman-nationalize-the-banks-331218/

    Paul Krugman: Nationalize the banks
    We’re going to have to do it, so let’s get on with it

    “Third, while banks must be rescued, the U.S. government can’t afford, FISCALLY or politically, to bestow huge gifts on bank shareholders.

    Let’s be concrete here. There’s a reasonable chance — not a certainty — that Citi and BofA, together, will lose hundreds of billions over the next few years.”

    Note Krugman’s concern about the FISCAL balance, when it involves people he doesn’t like. Also, notice the alarmist doomsayer “lose hundreds of billions”. When Krugman says monetary policy in 2008 wasn’t the problem, the real problems came later in housing policy, this is what he means. Krugman thinks it was a big mistake not confiscating all the assets in the financial system and using those assets to give everyone loan forgiveness on their houses.

  2. Gravatar of RebelEconomist RebelEconomist
    29. January 2013 at 13:02

    “A few years back I got a lot of grief from commenters who contested my claim that it was not clear whether Iceland was obligated to cover the deposits losses of Icesave in Britain and the Netherlands.”

    If I remember rightly (a link to said claim would be helpful), that was because you had no idea about the issues involved, like most of the other commentators to be fair. So, if your claim has been supported by the EFTA court, you have just been lucky, as you have been known to say about commentators who predicted a financial crisis years before 2008!

  3. Gravatar of Lorenzo from Oz Lorenzo from Oz
    29. January 2013 at 21:43

    Actually, the English kicked Norse butt in the end, at Stamford Bridge (1066).

    Then the Norse Mark II (the Normans, short for Norse-men) cleaned up at Hastings (also, of course, 1066). Putting on the throne the House of Rollo, whose lineal descendant is Her Sovereign Majesty Queen Elizabeth II. So, which side are the Vikings gets murky :)

    Though many of the sagas that have come down to us are Icelandic, so they may end up telling the story ;)

  4. Gravatar of ssumner ssumner
    30. January 2013 at 07:17

    Steve, Good find.

    Rebeleconomist, That’s a truly silly analogy–as I’m sure you know.

    Lorenzo, Thanks for the info.

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