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Re: Icelandic Taxpayers to Repay Icesave despite Assets?

Readers Corner

Re: Icelandic Taxpayers to Repay Icesave despite Assets?

Dear Eyglo,

Thanks as ever for the service you provide, and best of luck to yourself and your boyfriend in helping the Icelandic economy. Don't forget that 73% of Icelanders are employed in "services."

However, I can't let your lead piece of today [10.12.08] stand without a reply, and so I propose the following, subject to your approval.

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According to Fréttabladid today, the Icelandic government will have to pay out a hundred billion krónur in interest on the loans to fulfill the obligations of the Tryggingarsjódur, the Icelandic deposit insurance scheme in the line of fire over the Icesave fiasco. Of course that's a lot of money. What Fréttabladid fails to mention is the the 843 billion krónur that NBI (New Landsbanki) has provisioned against Icelanders and Icelandic companies not being able to pay back their debts.

The 843 million krónur are equivalent to half of Landsbanki's Icelandic loan book. If, by chance and by hard work but also by simple honesty, Icelanders manage to pay off more than half their debts, these provisions will become profits for NBI's sole shareholder – the Icelandic government.

NBI is not the only bank to have made such huge provisions. New Kaupthing went further and put aside 954 billion krónur, two-thirds of its Icelandic loan book. New Glitnir simply refused to say how much it had set aside when the IMF came checking the books. The higher the provisions, the less the new banks have to pay to their predecessors for the Icelandic business which was given to them by FME decree. But on the other hand, less money flowing into the old banks means less money to pay back foreign depositors. In the end the government will end up paying, whatever the scheme. Iceland's politicians, and now it seems the Icelandic media, are simply closing their eyes to the publicly available figures (let alone the private ones) and hoping they will simply go away.

Best wishes,

Physchim62 from Wikipedia, Nigel Wheatley from Capellades, Spain in real life.