As I have said many times in the past, Iceland stands out among all countries as the model for dealing with an economic/debt/housing crisis. At the very core it appears that their government, after a few crucial changes at the top, moved on behalf of their citizens and not with their core banks.
They nationalized them, a necessary step to rid the system of the wolves that were ready to eat their own children if necessary to make money, and then forgive a ton of debt of the citizens, especially those that had mortgages on homes that were out of balance with prices.
The results are a growing economy, 10 times the growth of the EU, and in general a satisfied populace, they know that they have the power to change the system now and will not forget it soon. Something that should have come out of the Occupy Wall Street movement.
Why Greece doesn’t do something similar, something that would fit into their particular situation is beyond me. Seems as if their government is all about becoming better serfs to the system and dragging all their citizens along with them.
Icelandic Anger Brings Debt Forgiveness
By Omar R. Valdimarsson – Feb 19, 2012 5:01 PM MT
Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.
Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.
“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”
The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.
The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.
“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”
Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.
Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.
Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”
People Vs Markets
Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.
Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.
Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.
“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.
According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.
“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”
As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.
A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.
Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.
That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.
The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.
According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik email@example.com.
I applaud the citizens of Iceland. They have shown the world what can be done when the people come together. Of course, they have the advantage of a relatively homogenous population that can agree on a single basic goal, criminal activity should never be rewarded and the good of the people trumps the ‘good’ of the corporate banksters.
Once again another huge volcano in Iceland is set to go off and could disrupt air travel again…
Icelandic Volcano Threatens Mass Disruption
A huge Icelandic volcano long overdue an eruption is showing signs of activity – threatening disruption to air traffic, experts have said.
There have been more than 500 tremors at Katla in the south of the country in just the last month.
An increase in activity at the site since July has also been causing volcanologists concern, when increasing temperatures and seismic activity caused a flood, washing away a road bridge.
The last major eruption at the volcano was in 1918, and caused such a large glacier meltdown that icebergs were swept by the resulting floods into the ocean.
Significant activity at Katla – which has a huge 6.2 mile (10km) crater – usually occurs every 40 to 80 years.
It is feared when it does eventually erupt, it could be the most powerful activity the country has seen in almost a century.
Catastrophic flooding could result as the frozen surface of the volcano melts, sending vast amounts of water into the Atlantic Ocean.
Volcano expert Andy Hooper, from Delft University, said although there had been increased activity at the site, it was difficult to predict if and when Katla would erupt.
However, he told Sky News Online that the implications for Iceland if an eruption did occur would be “major”.
“Because of the glacier on top, massive amounts of ice would melt, washing away the roads.
“There could also be a big ash fallout on people living in the area and that will affect the farms.
“There could be big implications for people there.
“In terms of the rest of the world, it really depends on the weather at the time of the eruption.
“If Katla erupts, it will erupt higher (than recent volcanoes) and that means the ash will stay around longer – that could impact on air traffic.”
A statement on Iceland’s Met Office website warned there was no imminent threat but that “given the heightened levels of seismic activity, the situation might change abruptly”.
“Monitoring teams at the Icelandic Met Office are following the ongoing activity closely, and sensor-based networks around the volcano ensure that all seismological, geodetic, and hydrological changes are detected.”
You can bet that the Icelandic people are prepared for this event!
Yet another volcanic eruption in Iceland that threatens to close European air traffic this week if the ash plume continues as it is now. This eruption, following the one in 2010, promises to be as bad as the last one. This eruption is not from the same volcano but another one 150 kilometers away from the last volcano.
We wait and see what else mother nature will bring our way in the coming weeks and months. So far we have not had a break from bad weather.
Iceland Volcano Ash May Reach U.K. This Week
A volcanic eruption that began May 21 under Europe’s largest glacier, Vatnajokull, could threaten trans-Atlantic air traffic, with ash reaching the U.K. this week according to Iceland’s weather office.
“If the eruption doesn’t abate, the ash plume could reach the U.K. later this week,” Haraldur Eiriksson, a meteorologist with Iceland’s Met Office, said in a telephone interview. “According to our latest forecast, the cloud is expected to reach north Norway by noon” today.
Eurocontrol, which oversees Europe flight paths, said on its website yesterday afternoon that “there is currently no impact on European or trans-Atlantic flights, and the situation is expected to remain so for the next 24 hours.”
A spokeswoman for the U.K.’s National Air Traffic Services Ltd. said last night that conditions are “very changeable.”
“We’re monitoring the situation very closely. We’re not speculating at all,” she said.
The eruption has already led to the closing of Iceland’s main international airport in Keflavik, the second such disruption in 13 months to the island nation’s air traffic. Icelandair Group hf (ICEAIR) said on its website it will cancel all European flights today, affecting 6,000 passengers.
The height of the ash plume has diminished to 10 kilometers (6.3 miles) from 20 kilometers on May 21, according to Eiriksson. Meteorologists are using a new weather radar system to monitor the development.
Eruption in 2010
An eruption beneath another Icelandic glacier, Eyjafjallajokull, on April 14, 2010, closed European airspace for six days, grounding 100,000 flights at a cost of $1.7 billion, according to an estimate then by the International Air Transport Association. Iceland, with a population of about 320,000, is one of the world’s most volcanically and geologically active countries, and eruptions are frequent.
“We can still see that the plume is reaching about 30,000 feet, although it’s impossible to say whether the particles that are currently being spewed out reach that height,” Eiriksson said. “The ash will mostly affect people in Iceland” today.
Saturday’s eruption began at about 6 p.m., roughly 220 kilometers southeast of Reykjavik. The volcano sent ash into the air, causing delays to some Scandinavian trans-Atlantic flights. The volcano’s latest venting ended in 2004. Grimsvotn and Eyjafjallajokull are about 150 kilometers apart.
It’s impossible to say with certainty when the eruption will come to a complete stop, Magnus Tumi Gudmundsson, a geologist at the Institute of Earth Sciences with the University of Iceland, told national broadcaster RUV. Previous eruptions by Grimsvotn have usually lasted a few days with limited or no impact on international air traffic, he said.
Ash fall covered small towns on Iceland’s southeast cost immediately following the eruption on May 21. Last night a dark cloud of ash reached Reykjavik, prompting city officials to warn people with asthma or other breathing disorders against venturing outside.
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik firstname.lastname@example.org
I for one am hoping that this volcano is not as bad and doesn’t close air traffic in Europe. I don’t know how many shocks the world economy can withstand before crumbling before our very eyes.