For mystery lovers there is nothing more puzzling these days but what is happening between the government of Iceland and the IMF.

It is now roughly two weeks since the IMF declared an intent to lend Iceland 2 billion USD, if approved by its board. The estimated need was 6 billion USD and the rest would be bridged in loans from different sources once the IMF had approved its part and therefore given a seal of approval.

And we still haven’t seen the loan.

We haven’t been told what it is for. How is the money going to be used? Which debts are going to be covered or will there be rebuilding or both?

Actually noone knows what the damage to the economy really is because the government isn’t telling. Maybe it doesn’t know. But it knows it needs 6 billion USD.

Why 6 billion?

The IMF board has held a couple of meetings in the weeks since it declared its intent, but has still to approve the loan to Iceland. Why? The government is hinting that UK and the Netherlands are refusing to let their appointees to the board approve the loan unless an agreement is reached regarding the IceSave disaster. But they are not saying so in public. The IMF is quiet.

Everything Geir Haarde touches turns into a mystery.


Meanwhile everyone is waiting for some actions from the government.

I wrote to the Ministry of Social Affairs regarding the price-indexed home loans. I asked if it wasn’t unfair that foreign currency loans had been frozen but price-indexed borrowers who had shown risk-aversion and not played the russian roulette were without solutions.

The answer came back that everyone’s standard of living would take a hit in the coming times. And I shouldn’t envy those who’d taken the foreign currency loans, once the ISK-index would go below 200 (it is now 223, up from 115 a year ago).

I replied that I had no belief in it ever going back below 200. My letter has been transferred to a work-group in the ministry.

The main hindrance to Iceland entering the EU and the Euro has been the Independence Party. They are slowly accepting that we have no other choice.

First it was, “no we are not discussing this at all”.

Then it was, “why not the USD or the Norwegian krona?”

Then it was, “why not unilaterally start using the Euro?”

And it will end up being, “lets talk”.

Obviously the Independent Party doesn’t want the EU for the two same reason that Icelandic citizens are craving it.

1) The Euro is so much harder to manipulate. You cannot make massive gains on betting for and against the krona anymore, making financial sorcery practiced by the backers of the party so much harder.

2) Entering the EU will diminish the extraordinary grip of power that Icelandic politicians have on their nation.

Unless all is doomed in relations with the UK and Netherlands, Iceland will be in the EU within four years. And if they won’t have us, then it should be noted that we are great friends of Barack Obama.



1 Response to “Roundup”

  1. 1 Roy November 10, 2008 at 8:47 pm

    Wait a minute, am I interpreting this correctly?
    “Neither the Icelandic Minister of Finance nor the Minister of Trade was aware of the problems facing Icesave, a daughter company of Landsbanki Bank, reports.

    The head of the country’s Financial Supervisory Authority said at the weekend that Bjorgvin G. Sigurdsson, Minister of Trade was not informed about the issue this spring, as some have suggested.

    Arni M. Mathiesen, Finance Minister said that the bank’s troubles had been discussed for some time; but that he had absolutely no idea that Landsbanki’s Icesave troubles would need such radical action before the beginning of September.

    When asked if it was ill-advised to allow Landsbanki to start up Icesave services in the Netherlands in May in light of the parent company’s difficulties, he says he had not followed how the matter had evolved, and did not know who took the decision. The decision, he says, did not fall on him to make.”

    Resolution…at last , I´ll sleep better tonight knowing that these guys are working with the fellow at the helm!

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