Icelanders Reject Landsbanki Repayments

For the second time in as many years, Icelanders have rejected a public financial repayment agreement to cover the losses of a failed private Icelandic bank, Landsbanki Island, that operated an Internet only bank in Britain and the Netherlands under the name Icesave. Landsbanki Island collapsed during the height of the global financial crisis in October 2008 when its highly speculative derivative investments in the US real estate market failed.

The British and Dutch governments, in turn, were forced to reimburse nearly 400,000 people in danger of losing savings held in the Icelandic bank's subsidiary Icesave accounts. Britain and the Netherlands are demanding that the government of Iceland repay some €4 billion, roughly $5.8 billion dollars, in losses. 

“The turnout of the referendum was high and close to 40% voted for and 60% voted against the law,” the Government of Iceland said in a statement. Iceland's Socialist Prime Minister, Johanna Sigurdardottir, said yesterday that Icelanders had chosen "the worst option" in rejecting the repayment plan.

Her statement added that the Icelandic government “will do all in its power to secure that the referendum outcome will not have a major impact on Iceland´s economic program and the fiscal consolidation plan which it has been pursuing.” The government warned that in light of the outcome of the referendum, there will be a “reassessment of macroeconomic assumptions,” adding that current fiscal plans will be reviewed. “A revised prognosis and budget figures will be available no later than in early May,” the government said.

The issue will now be decided by the European Free Trade Association (EFTA) Surveillance Authority court.

The first attempt at a repayment deal – specifying an interest rate of 5.5 per cent to be paid over eight years - was rejected by 93 percent of Icelandic voters in March 2010. Under this second proposal, Iceland was to pay over 30 years from 2016, with a 3.3 percent interest rate to Britain, and a 3 percent rate to the Netherlands. The deal had the backing of the Icelandic parliament, which hoped to draw a line under the dispute. But the President, Olafur Ragnar Grimsson, refused to sign it, triggering a second referendum.

The issue is expected to cloud Iceland's bid to become a full member of the European Union. Still, Icelanders are refusing to be held hostage with the no camp painting the vote as a rejection of the notion that taxpayers of Iceland must assume the liabilities created by financially imprudent private banks.

More from The Independent.

Around the World

News from around the globe impacting your world.

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European Central Bank Raises Key Interest Rate. For the first time since the financial crisis of 2008, the European Central Bank raised interest rates by a quarter point to 1.25 percent on Thursday. Preliminary figures suggest that the inflation rate within the euro zone has already reached 2.6 percent, 0.6 percent higher than the declared ECB goal of 2 percent or less. Thursday's step is also aimed at reining in speculation fuelled by supplies of cheap money. Market analysts are predicting the increase will be the first in a series and that interest rates could reach 1.75 percent by the end of the year. More from Der Spiegel.

China's Energy Policy Threads a Fine Line in the Middle East. Peter Lee of the Asia Times looks at China's initiatives in the wake of Arab unrest. Lee notes that "China has no credibility as a democratic reformer or clout as a military power in the Middle East; it seems to be trying to carve out a role for itself as a regional facilitator, one with good relations with all the key players, from Egypt to Israel to Saudi Arabia to Iran." With US-Saudi relations are now strained, China believes that it may have an opening to become a bigger player in Mid-East geopolitics however Beijing may find it increasingly difficult to placate Tehran, its biggest Mid-East energy supplier, as it moves to court Riyadh.

US Expels Ecuadorian Ambassador. The United States is expelling Ecuador's Ambassador in retaliation for the Andean nation's decision to declare US Ambassador Heather Hodges a persona non grata after remarks she made about police corruption were made public by Wikileaks. In addition, the US has cancelled upcoming talks scheduled for June between Washington and Quito. More from the Financial Times.

Korean Producer Price Growth at 28 Month High. Korea's Producer prices rose at the fastest pace in 28 months, putting greater pressure on the Bank of Korea (BOK) to raise interest rates. The producer price index increased 7.3 percent in March from a year earlier, up from a 6.6 percent rise in February, representing the sharpest gain since the 7.8-percent elevation in November 2008, according to the central bank Friday. The BOK is struggling to contain consumer prices that have been rising significantly faster than the government's 3 percent target. The full story in the Korea Times.

Cuban Dissidents Reach Madrid. Thirty-seven former political prisoners and 208 of their relatives landed at Madrid's Barajas airport on Friday. These latest arrivals are the last of a group of political prisoners whose release was negotiated last year among the Cuban and Spanish governments and the Cuban Catholic Church. All told, 115 political prisoners have been released by Cuba and exiled to Spain. The latest group includes Cuban dissident Orlando Fundora, who was arrested in 2003 among a well-known group of 75 dissidents. More from CNN International.

Linking Up with the World

Here is the Friday, January 1st, 2010 edition of what's making news and interesting reads from around the world.

Iceland Votes to Repay Billions
Iceland's parliament narrowly approved by 33 to 30 vote a repayment scheme to pay back 3.4 billion pounds ($5 billion USD) to Britain and the Netherlands after the Icesave bank collapsed in late 2008 in the wake of the global financial crisis. The money will reimburse the British and Dutch governments which stepped in to compensate depositors with Icesave after its parent bank Landsbanki failed last year. The bank's collapse affected more than 320,000 savers. There has been strong opposition to the measure in Iceland, amid fears the country would not be able to afford repayments. But the leftist government of Prime Minister Jóhanna Sigurðardóttir hopes the move will help boost the country's bid to join the European Union and repair its battered economy.

Charges Against Five Blackwater Employees Dismissed
A federal judge has dismissed all charges against five Blackwater Worldwide security guards charged in a deadly Baghdad shooting. More from the New York Times. In Iraq, the news was received with disbelief, anger and bitter resignation.

US Drone Strike in North Waziristan
The second US drone strike in as many days has killed three militants in North Waziristan, part of the Tribal areas of Pakistan. The unmanned US predator drone fired two missiles against a suspected militant hideout in Ghundikala village, 15 kilometres east of Miramshah, the main town of North Waziristan and close to the Afghan border. The story in Pakistan's Dawn newspaper.

Israeli Settlement Construction Continues Unabated
The Israeli newspaper Haaretz reports that despite a temporary ban on construction in Israeli settlements in the West Bank, hundreds of housing units remain under construction in isolated settlements.

Germany Inc. - A Radical Restructuring Needed
The German news magazine Der Spiegel finds that German economy performed "astonishingly well" against the backdrop of the global financial crisis in 2009. Still the staff writers of Der Spiegel believe that Germany "will need to lay the foundations for a radical restructuring" in 2010 if the country is to " fend off powerful new competitors from China and India." They ask if Germany needs a new business model. It's a question we might ask here in the United States.

DPRK Calls for an End to "The Hostile Relationship"
The New York Times reports that  North Korea called for an end to “the hostile relationship” with the United States, issuing a New Year’s message that highlighted the reclusive country’s attempt to readjust the focus of six-party nuclear disarmament talks.

In an editorial carried by its major state media outlets, North Korea said that its consistent stand was “to establish a lasting peace system on the Korean peninsula and make it nuclear-free through dialogue and negotiations.” The editorial added that “the fundamental task for ensuring peace and stability” was “to put an end to the hostile relationship” with the United States.

The sequence of easing tension with Washington, establishing a peace regime and then denuclearizing the Korean peninsula has been shaping up as the North’s policy approach before it re-engages in talks about giving up its nuclear weapons, according to officials and analysts in Seoul.



However, the Korea Times reports that a South Korean think tank published a paper arguing that North Korea may detonate a third nuclear device and provoke border clashes to escalate tension on the Korean Peninsula next year. The Korea Institute for Defense Analyses (KIDA) reported that through a third nuclear test, Pyongyang could show the world that it has no plans to scrap its atomic weapons program. On Thursday, President Lee Myung-bak noted that although there was little progress in inter-Korean relations in 2009, he believe that his government has laid the groundwork for developing relations in a positive direction.

 

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