Bloomberg is reporting the following from Iceland’s Special Investigation Commission. The English translation of the report is not yet fully available:
Iceland’s government, central bank governors and head of the financial regulator in 2008 all showed negligence in breach of existing laws that allowed the collapse of the island’s financial industry, a report found. Read more
“Time has run out,” Finance minister Steingrimur Sigfusson has told parliament. From Reuters:
Iceland’s economic woes looked set to worsen as it headed for a “no” vote in a referendum on terms for repaying “Icesave” debts that have held up vital aid to the crisis-hit North Atlantic island nation. Read more
Moody’s Investors Service said today that the breakdown in the talks between the governments of Iceland, the United Kingdom and Netherlands to resolve the Icesave dispute puts the Icelandic government’s Baa3 rating under downward pressure. This is because Moody’s believes the failure to reach a new agreement is likely to lead to an extended delay of the IMF programme, a weaker economic recovery and potentially, political instability. Overall, Moody’s believes that Iceland’s path out of the crisis now appears more difficult.
Talks have collapsed between Britain, the Netherlands and Iceland about repayment of £3.4bn (€3.8bn) lost by depositors in the failed online bank Icesave, raising fears that the country will fail to meet its obligations.
On Monday Iceland rejected an offer to soften repayment terms, British officials said. It dismissed a proposed reduction in interest rates as insufficient and failed to win support for a counter-offer that one negotiator described as “fanciful”. Read more
An Icelandic delegation currently in London is armed with a plan, agreed with opposition parties in Reykjavik. Icelandic politicians hope to gain British and Dutch approval for the plan, which might allow the cancellation of a divisive referendum.
Details on the domestic consensus are scarce, but people close to the situation said it could involve accelerated repayments in return for lower interest rates. This could be in everyone’s interests. If the right balance is struck, the British and Dutch will be paid more quickly and the Icelanders will pay less in total. With rising inflation, why let time eat away the value of the money?
The Netherlands’ central bank has just said it wasn’t fully informed by Landsbanki Islands HF and Iceland’s regulator FME on Landsbanki’s financial position. “The evaluation of Mrs. De Moor and Mr Du Perron from Iceland confirms that the information was inadequate,” says the statement (if Google translate can be trusted). The statement comes less than a week after Nout Wellink, Dutch central bank governor, accused the Icelandic government of lying.
The Dutch central bank president has just accused Iceland’s government of lying about the health of the country’s banks before their collapse in October 2008.
The Dutch and British governments are currently seeking to agree the terms of Iceland’s repayment. Read more
The central bank has cut all its key rates by 50bp, following similar cuts last month, but warned of ‘limited room for manoeuvre’ if access to foreign capital markets is not resolved. The key seven-day collateral rate now stands at 9.5 per cent.
Inflation is falling, by 0.3 per cent in January alone, although the bank still expects to meet its inflation target of 2.5 per cent by the end of the year. The bank said there “should be scope for continued gradual monetary easing” if inflation continues to fall, and the króna remains stable or appreciates. Read more