Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

[Joanne98]

Source: Bloomberg

Iceland’s President Olafur R. Grimsson said his country is better off than Ireland thanks to the government’s decision to allow the banks to fail two years ago and because the krona could be devalued.

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

Ireland’s Prime Minister Brian Cowen said this week his government has discussed an 85 billion-euro ($112 billion) bailout with the European Union and International Monetary Fund after the country’s banks threatened to bring the euro member to the brink of bankruptcy. Iceland’s banks, which still owe creditors about $85 billion, were split to create domestic units needed to keep the financial system running, while foreign liabilities remained within the failed lenders.

As a consequence, “Iceland is faring much better than anybody expected,” Grimsson said. The Icelandic state’s liability on foreign depositor claims stemming from Icesave accounts at failed Landsbanki Islands hf should be put to a national referendum, he said.



Read more: http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

[bemildred]

1. Actually a lot of us "expected" that letting the banks fail was the right thing to do.

Just saying.

[Joanne98]

2. We did but nobody listened.

[mackerel]

3. That was the one thing one of my ultra conservative

friends and I agree on, letting them all fall down.

[BR_Parkway]

6. Yeah, they never want that "invisible hand of the free market" choking

off the places where they have money to lose, it's only supposed to apply to the rest of us

[DCKit]

4. That just makes too much sense to work in the U.S..

I wonder if the average voter in Ireland will have any say in this. Once the money has been borrowed from the incredibly beneficent IMF, World Bank and Goldman Sachs, they're screwn. And it will no longer matter if they throw out their entire government.

[DeSwiss]

5. Ours have failed as well....

...but no one seemed to notice.

K&R

[mackerel]

7. Biffo has promised elections in January but a lot of my

friends and collegues say it's taxation without representation right now. Kicker is that Fianna Fail (party in power) is a conservative party much like the Republicans.

[DeSwiss]

8. Yes, and I understand.....

...that their "majority" is getting awfully thin. Personally, I think that it's well past time that the sodding rich got their comeuppance. If we the "majority of the world" don't stand up to these pricks, they'll bleed us dry.

- Workers of the world unite, indeed.

[Fearless]

9. No government debt does not equal a strong economy per say.

[truedelphi]

10. Why is Ireland being slammed so hard?

The Big Contenders in the G 8 (and G 20) are so willing to pick on Ireland. (And now Iceland is drubbing her as well.)

But if what I read about Ireland the other day is true, consider this:

The Irish top tier of Corporate Taxation stands at 12%, and undoubtedly this is what the "Bigger, more Fiscally Astute" Nations advised them to do. Meanwhile, the very very VERY Asute Germany taxes the Corporations at THIRTY PERCENT!

The Irish agreed to have low wages for their work force - and again this is what the "Bigger, more Fiscally Astute" Nations advised them to do. Now many of those low wage workers find themselves unable to pay off their credit card debt. But if wages had been higher (Again, look to Germany) I imagine many of the Irish could handle their credit card payments just fine.

[muriel_volestrangler]

12. Why do you think bigger nations told Ireland to do that?

All evidence is that other European nations were a bit annoyed that the Irish government set it so low. It was an incentive for multinationals to locate their European operations in Ireland rather than another European country, and the other countries saw it as producing a 'race to the bottom'. For instance, France and Germany recently asked Ireland to raise its corporate tax rate, but Ireland refused:

Ireland takes hardline stance on corporation tax as bailout talks begin

Dublin tells EU and IMF that lowest rate in any major European economy is 'non-negotiable'

A defiant Ireland tonight insisted its corporate tax regime was an "absolute red line" as it took a hard-line stance in the opening skirmishes with Europe and Washington over a possible bailout.

On the day a dozen officials from the International Monetary Fund descended on the Irish capital, finance minister Brian Lenihan said the country would not surrender its investment-friendly tax regime as the Washington financial experts began their health check on the economy.

Prompting speculation that no quick deal was in prospect, the government sought to allay mounting public fears that Ireland would cede to demands from Germany and France to raise its 12.5% corporation tax – the lowest of any major European economy – as the price of a bailout.

Comments earlier in the day by French economy minister Christine Lagarde that the negotiations included a change to the tax regime had promoted an immediate backlash in Dublin. Deputy prime minister Mary Coughlan told the Irish parliament that the low rate of tax was "non-negotiable" even though the government conceded that it may need help to deal with what Lenihan called the "very big issues" in its debt-laden banking system.

http://www.guardian.co.uk/business/2010/nov/18/ireland-bailout-imf-europe-corporate-tax

After that, Germany backed down, and said it's up to the Irish government whether they should raise it: http://www.dw-world.de/dw/article/0,,6248267,00.html

Up until the new proposed austerity measures, Ireland did not have low wages. For instance, it had the second highest minimum wage in the EU by normal exchange rates las year, and sixth highest when the cost of living is taken into account (notice that this means Ireland was a high wage country, but expensive to live in):

Eurostat tracked the minimum wage of 20 EU member states in January 2009. When looked at in monetary terms only, Ireland has the second highest, with recipients being paid €1,462 a month. This compares with €1,642 in Luxembourg, €1,321 in France, and €1,010 in the UK.

When expressed in purchasing power, the gap between the countries narrows considerably. Ireland’s minimum wage is reduced to €1,152 per month, just €2 less than that of the UK’s monthly payment of €1,154. In France, the purchasing power of the minimum wage is €1,189, in Belgium it’s €1,254, the Netherlands pay €1,336 and Luxembourg continues to top the table at €1,413.

http://www.timesonline.co.uk/tol/news/world/ireland/article6736267.ece

However, the Irish government has announced a cut in the minimum wage as part of its 'austerity measures'. So there may be future low wages. But this is a result of the Irish governments' policies (eg guaranteeing the banks' debts).

[truedelphi]

13. I have lsot track of the many American corporations that would pull out of Ireland the

Moment the higher taxes are in effect, Hewlett Packard being among them.

[muriel_volestrangler]

14. Hewlett Packard isn't a nation, though

It's multinational businesses telling Ireland they have to keep the corporate tax low, or they'll leave. Other nations would like to see a few of them leave Ireland and come to them instead.

[truedelphi]

15. Point taken. n/t

[JackRiddler]

11. Please add to the thread on GD, too!

With excerpts from Krugman & Baker on Ireland.

Ireland shows that the banksters will betray and plunder the good soldiers, too.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9636967

.

The Good Irish Soldier

Ireland perhaps more than any other example shows what the bankster game is really about.

They don't give a shit about good soldiers.

Here is a country that, unlike Greece or Portugal (frequent targets for outrageous blame), strictly followed all the rules proscribed by the neoliberals, ratings agencies and austerity hawks. Open markets, no capital controls, wage repression, social welfare cutbacks, balanced budgets five years in a row before the crisis, low taxes, the works. They had almost no public debt.

Irish public debt came almost entirely through the crisis, because Ireland obediently bailed out the banks. It's actually the Irish banks' debt, socialized.

And yet, as soon as the banksters decide there is a profit in it, the good Irish soldier is lined up against the wall and shot.