My Illegal Savings (ESA)

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Eygló Svala Arnarsdóttir's picture

After the crash and burn of 2008, when Iceland’s three largest banks collapsed almost overnight, crippling the Icelandic economy and wiping out the savings of thousands of Icelanders, many people figured it would be safer to save abroad from then on.

I was one of those people. And today I’m one of the approximately 30,000 Icelanders—10 percent of the nation—who deposit a monthly sum of their salaries into a special pension fund in a country we feel we can trust with our money; in my case, Germany.

Bayern-Versicherung Lebenversicherung AG, through Icelandic company Sparnaður, did not make any big promises like pre-collapse Kaupþing with their ‘Kaupthinking’ did—where a big-bellied, big shot banker with a Tortola tan and gold rings on his fingers told me that they would multiply my pensions by the time I retired, laughing patronizingly when I asked what would happen if the bank collapsed: “Well, in the unlikely case of a banking collapse, Kaupþing, as the biggest bank, will be the last to fall.” He was right: Kaupthing went down one day after Glitnir and Landsbanki.

Instead of getting filthy rich through all of Kaupþing’s smart investments in itself, a large portion of my savings went down with the bank. Starting from scratch, I thought: “I don’t have to be filthy rich by the time I retire. If I just get my savings back plus moderate interest, I’ll be guaranteed a comfortable retirement.”

That is what Bayern-Versicherung promises, the German state guaranteeing that my savings won’t be lost. Like the majority of Europeans, I have faith in Angela Merkel. Another upside with saving in Germany, is that my unreliable Icelandic króna is converted into a more stable currency, the euro.

But namely that poses a problem. To support the wobbly Icelandic króna, capital controls have been in place in Iceland since shortly after the collapse.

This makes it illegal—problematic at best (exemptions have sometimes been granted)—to transfer money out of the country, causing inconveniences for private citizens and huge hindrances for businesses, having a negative impact on the economy in the long run.

There’s nothing we can do, though. We’re basically being held hostage by the króna.

While the government’s goal is to loosen—eventually lift—capital controls, the highly complicated process has time and time again been postponed because of the impact it is bound to have on the króna and hence unavoidably the Icelandic economy, the extent of which is uncertain.

Up until recently, the 30,000 Icelanders who have their pension savings abroad, have been assured that this practice was legal.

However, now the Central Bank has announced that through a different interpretation of the law on capital controls, saving abroad is henceforth illegal.

The Icelandic agents for foreign financial companies have been scrambling to find a solution to the problem but it looks as though we, the savers, will be forced to terminate the contracts we made with these companies, and, as we won’t be able to keep our end of the bargain—again—lose a large portion of our savings.

Consequently, companies like Sparnaður will lose their credibility and all their customers and have no other option than to close up shop. This week it was reported that Sparnaður had given notice to all its 50 permanent employees.

And what will the government of this banana republic called Iceland do to compensate our loss?

Minister of Finance Bjarni Benediktsson told RÚV that he is “concerned” about the thousands of Icelanders who have been saving abroad in the past years but that the matter is “complicated.”

He acknowledged that it is a bit of a blunder to change the interpretation of the laws on capital controls six years after they were established, calling the practices of companies like Sparnaður “unfortunate.”

Why, thank you, Bjarni. You just made my day.

And what will I do with my savings from now on?

It doesn’t matter, really. I might as well toss them out the window, I reckon, because a financial crisis is likely to continue to hit at least once a decade, as it has in the past, and I will have lost my money many times over by the time I retire.

Eygló Svala Arnarsdóttir – eyglo@icelandreview.com

Views expressed here are the author's own and do not necessarily reflect the opinions of Iceland Review.