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Iceland’s debt write downs cleared a path to recovery


Normal Lord

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Aug 3, 2011
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499
Iceland

Interesting read note the important part...

In late 2009, after heated debate, the government, the financial sector, and the business federation agreed on a comprehensive debt-relief programme for firms and families. The main components were: firstly, for the household sector debt in excess of 110 per cent of the fair value of each property was written off. Specific relief measures (administered by a bank or a new debtors’ ombudsman) were put in place for those that could not service a reduced loan.

Secondly, low-income, asset-poor households with high-interest mortgage payments got a temporary subsidy from the government.
Thirdly, small- to medium-sized firms could apply for debt relief if they could credibly document positive cash-flow from future activities. The firm had to be willing to re-engineer its operation so as to make best use of its assets.



Ireland took the wrong path by putting the debt on it's citizens and not offering help to those who need it. Hence the pathetic state of the economy right now. FF sold us out, now FG carry on selling us out to the banks and ignoring the problems and not offering help.

Iceland took bold action, it worked and now they have bounced back. Meanwhile Ireland (who's problems started before Iceland) is crapping along at the bottom with a dead domestic economy, huge debt burden, vast numbers of people in negative equity, big tax hikes and the poorest people have even less than they did. With little prospect for any substantial recovery (and a ropey outlook for most of the EU) there was a way to deal with this problem. Debt write downs across the board, help for those who needed it.

Result an economy that is put back into shape fairly quickly. But don't expect FG to actually admit they are on the wrong path or their austerity drive isn't working (it's def not working we all know that) More of the same kill the patient medicine that isn't and has not worked.

Even the IMF know they screwed up big time. Bank debt is not people debt, we're not a charity and we've been made to suffer to save the banks.
 

General Urko

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15,744
The OP, in fairness to the 2 major political parties in the state, has not mentioned the Labour party's collaborationalist role in continuing the destruction of our economy, nor that come to think of it, of the unfortunately up and coming again, The Ecology Party Of Ireland (Greeners)!
 

jackryan

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3,693
Doesn't look to be doing the ruling government in Iceland any good heading for a thumping in the forthcoming elections with the old parties coming back again, so life mustn't be that great there?
 

Normal Lord

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499
I've given labour plenty of stick for being the "accomplice" to FG's policies. I think that it is well known the party is virtually wiped out with little grass roots support.

All I know is this, Iceland did a whole better job of their mess than it has here, ie not dealt with. Same FG mantra about no universal write down, no help for those in distress left to the mercy of the banks.

And the economy is a sad pathetic state and will be for many years. Despite the low corporation tax, the populace has suffered through ill advised austerity that has clearly not worked.

Yet they carry on regardless
 

Taxi Driver

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Joined
Jan 8, 2011
Messages
4,296
Ireland took the wrong path by putting the debt on it's citizens and not offering help to those who need it. Hence the pathetic state of the economy right now. FF sold us out, now FG carry on selling us out to the banks and ignoring the problems and not offering help.

Iceland took bold action, it worked and now they have bounced back. Meanwhile Ireland (who's problems started before Iceland) is crapping along at the bottom with a dead domestic economy, huge debt burden, vast numbers of people in negative equity, big tax hikes and the poorest people have even less than they did. With little prospect for any substantial recovery (and a ropey outlook for most of the EU) there was a way to deal with this problem. Debt write downs across the board, help for those who needed it.

Result an economy that is put back into shape fairly quickly. But don't expect FG to actually admit they are on the wrong path or their austerity drive isn't working (it's def not working we all know that) More of the same kill the patient medicine that isn't and has not worked.

Even the IMF know they screwed up big time. Bank debt is not people debt, we're not a charity and we've been made to suffer to save the banks.
Where do you think the money for the debt relief came from??



The article includes this sentence but does not give it enough emphasis:

Devaluation of the króna doubled the nominal value of loans in foreign currency.
A large proportion of Icelandic mortgages were exchange-linked loans. How would you fancy having a 200,000 mortgage in a collapsing economy and seeing it double to 400,000 because the currency also collapsed? Even after the 110% principle a lot of borrowers still owed MORE than they did prior to the crisis.
 

seabhcan

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Joined
Sep 3, 2007
Messages
14,327
The main components were: firstly, for the household sector debt in excess of 110 per cent of the fair value of each property was written off.
The iceland system is far from generous. The 110% figure ignores that Icelandic mortgages (uniquely) are linked to inflation. So if inflation is 4% (which it is) then the principle of your mortgage increase by 4% per year.

In year 1, your mortgage is 110%. In year 2, its 114.4% + interest. In year 3, its 119% + interest. And so on. You're back to where you were very quickly.

You have to pay off 4% per year plus interest just to stay where you are. On a 600k mortgage, that would be about 50k.
 

Goa Tse

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Dec 27, 2010
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2,280
It'll never happen here.
 

olli rehn

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Nov 19, 2010
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8,527
Where do you think the money for the debt relief came from??



The article includes this sentence but does not give it enough emphasis:



A large proportion of Icelandic mortgages were exchange-linked loans. How would you fancy having a 200,000 mortgage in a collapsing economy and seeing it double to 400,000 because the currency also collapsed? Even after the 110% principle a lot of borrowers still owed MORE than they did prior to the crisis.




Hey hey hey- what are you doing ?! This is exactly one point the dreamers of an Icelandic solution do NOT want to know...
 

Analyzer

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Feb 14, 2011
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46,201
What is the difference between Ireland and Iceland ?

Ireland is getting more and more broke with every passing year.
 

General Urko

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Oct 24, 2012
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15,744
If you go by the following article (written by an ace radickal feminist stirrer)

Iceland: the world's most feminist country | Life and style | The Guardian

:mad:
It's becoming a hell on earth country to live in for both men and women!:mad: And we are going to become like it but from a coalition of mad rad fems and religious nutters!:mad:
They have even been serious proposals there to make all Porn illegal!:mad:
 

Trainwreck

Well-known member
Joined
Sep 6, 2012
Messages
26,809
Iceland

Interesting read note the important part...

In late 2009, after heated debate, the government, the financial sector, and the business federation agreed on a comprehensive debt-relief programme for firms and families. The main components were: firstly, for the household sector debt in excess of 110 per cent of the fair value of each property was written off. Specific relief measures (administered by a bank or a new debtors’ ombudsman) were put in place for those that could not service a reduced loan.

Secondly, low-income, asset-poor households with high-interest mortgage payments got a temporary subsidy from the government.
Thirdly, small- to medium-sized firms could apply for debt relief if they could credibly document positive cash-flow from future activities. The firm had to be willing to re-engineer its operation so as to make best use of its assets.



Ireland took the wrong path by putting the debt on it's citizens and not offering help to those who need it. Hence the pathetic state of the economy right now. FF sold us out, now FG carry on selling us out to the banks and ignoring the problems and not offering help.

Iceland took bold action, it worked and now they have bounced back. Meanwhile Ireland (who's problems started before Iceland) is crapping along at the bottom with a dead domestic economy, huge debt burden, vast numbers of people in negative equity, big tax hikes and the poorest people have even less than they did. With little prospect for any substantial recovery (and a ropey outlook for most of the EU) there was a way to deal with this problem. Debt write downs across the board, help for those who needed it.

Result an economy that is put back into shape fairly quickly. But don't expect FG to actually admit they are on the wrong path or their austerity drive isn't working (it's def not working we all know that) More of the same kill the patient medicine that isn't and has not worked.

Even the IMF know they screwed up big time. Bank debt is not people debt, we're not a charity and we've been made to suffer to save the banks.
That is too narrow an explanation.

This is not, in isolation, why iceland got things more correct than us.
 

Raketemensch

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Apr 11, 2009
Messages
3,128
Doesn't look to be doing the ruling government in Iceland any good heading for a thumping in the forthcoming elections with the old parties coming back again, so life mustn't be that great there?
Is that true? If so, then can one of the Iceland fanciers explain why?
 

stopdoingstuff

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Feb 26, 2011
Messages
22,897
Iceland's Debt to GDP ratio peaked in 2010-2011, just so we are all clear. And it's government debt to GDP ratio is lower than ours.


So is their unemployment rate, and their economic growth rate is higher. Obviously it's far from perfect, but no society takes a hit like that and returns to Nirvana in few years. But overall, even the Eurotron drones at the Breugel institute reached the correct conclusion on who handled the crisis better:

Iceland seems to have the right policy mix. Internal devaluation in Ireland and Latvia through wage cuts did not work, because private-sector wages hardly changed.
Productivity increased significantly in Ireland and moderately in Latvia, but only
because employment fell more than output, with harmful social consequences.
.....
The experience with the collapse of the gigantic Icelandic banking system
suggests that letting banks fail when they had a faulty business model is the right
choice.
https://docs.google.com/viewer?a=v&q=cache:jQoAjeO21e0J:www.bruegel.org/download/parent/663-a-tale-of-three-countries-recovery-after-banking-crises/file/1534-a-tale-of-three-countries-recovery-after-banking-crises/+bruegel+institute+iceland&hl=en&pid=bl&srcid=ADGEESjIq4sRJr5oVEp3M4FZcEYABQDpmq-Is7OCnG1j8eTKueNrdWOI98yctmB7Xflm6qEa7vbu6sDLmluDStqZWIXxynx0rSc_L2_M4-7te3C0MtP5hEq6MfgzQY4K1syxBz9eQtht&sig=AHIEtbQlfQ8zoS2zgUOO8zOpRn0OAMq9dw

And I would trust them more than posters here, because they have no particular horse in any domestic political race.
 

General Urko

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Joined
Oct 24, 2012
Messages
15,744
Is that true? If so, then can one of the Iceland fanciers explain why?
So people never learn, Fianna Fail back in Iceland as well as here, it seems!
As the old saying is - Nobody ever went poor underestimating the intelligence of the general public!:mad:
 

General Urko

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Joined
Oct 24, 2012
Messages
15,744
It'll never happen here.
This time, it's different!
No we will have a soft landing!:roll:

Actually we did, - a soft in the head landing!:oops:
 

stopdoingstuff

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Joined
Feb 26, 2011
Messages
22,897
The English and Dutch.
They didn't. The ironic thing is that the only ones to have lost deposits have been EU depositors in spite of the fact that the ECB has expanded its balance sheet to over three trillion Euro. The Dutch and Brits it seems are to be paid, just not all at once. Strange how 300,000 fisher men can avoid totally burning depositors but the central bank of the largest economic zone in the world cannot.
Iceland wins ruling over failed bank repayments - RTÉ News

Iceland has won a court ruling allowing it to repay billions of euros on its own terms to Britain and the Netherlands for bailing out depositors in a failed Icelandic bank.
Iceland has said it will fully repay both countries, but through a gradual process as it runs down the assets of failed bank Landsbanki.


The Icelandic Foreign Ministry said 585 billion Icelandic crowns of the 1,166 crowns of claims from Icesave had been repaid from the failed Landsbanki estate, representing more than 90% of the minimum deposit guarantee covering the savers.
"It is expected that the Icesave claims will be paid out in full by the actual debtor, the estate of the failed Landsbanki," the Foreign Ministry said.
 

DuineEile

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