Who was consulted when Gordon Brown and Alistair Darling decided to put the rescue of the global capitalist system ahead of every other priority? Was there a rash of Blair-style focus groups? Were any opinion polls commissioned? Not that we know of.
But, even as the grip of winter brings activity to a halt across the Northern Hemisphere, something is stirring once again in Iceland.
Yesterday, President Olafur R. Grimsson delivered a major blow to the global financial system when he responded positively to a petition by a quarter of the country’s population of just 320,000. Opinion polls say that two-thirds of the population are with the petitioners in opposing government proposals to raise interest rates to help repay £3.4bn of Icesave deposits owed to the UK and Netherlands.
The bill amounts to £40,000 for every household in Iceland – an eerily similar sum to that New Labour has tied round the neck of UK householders.
Grimsson, who is serving his fourth term as the elected president, said it was in the interests of democracy to put the plan to a referendum, given the importance of the issue to Iceland’s future.
“It has steadily become more apparent that the people must be convinced that they themselves determine the future course,” he said. “The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery.”
The idea that people might have a say in their future sent shock waves around the world. There’s a real fear that a vote by Iceland’s people against repayment could trigger a similar revolt in countries with much deeper debt – like Spain, the US, and the UK.
Capital’s advanced guard struck back as Iceland’s credit rating was reduced to junk status by global agency Fitch. Further help from the International Monetary Fund has been thrown into doubt. New Labour minister Lord Myners was wheeled out to warn Iceland that it wouldn’t be able to join the European Union if the money wasn’t repaid.
What happens if the referendum takes place and the people vote “No” is anyone’s guess. Countries have defaulted on their debts before, but never has the world of finance been so interconnected and so interdependent. You’ll remember that New Labour used anti-terrorist legislation late in 2008 freezing all Icelandic assets on UK soil.
Iceland is small, but the impact could be world-changing. Even Premier League football club West Ham United is caught up in the net. It is currently up for sale by its current owner CB Holdings whose biggest shareholder is Icelandic bank Straumur. This went bust last year in the wake of the global crisis which saw off the three largest banks Glitnir, Landsbanki and Kaupthing. Before the crash their combined debt exceeded approximately six times the value of the nation's annual output.
It’s just less than a year since the “Saucepan Revolution" – so called because of the pots and pans protesters had with them - that made Geir Hilmar Haarde the first leader to resign as a result of the global economic crisis.
President Grimsson, clearly senses the potential for a repeat performance on an even more dramatic scale. A few months ago he told the Global Creative Leadership Summit that during the global financial meltdown “the political system was tested to its limit,” adding: “Even in the most stable and secure democracies, it almost resembled the revolutionary situations we read about in history books.”
Grimmson was quick to add: “But we have the capability and the mandate to solve these problems.” Yesterday, by refusing to sign the legislation agreeing to punitive repayments to Britain and the Netherlands, Grimmson himself discovered that this “mandate” is more imaginary than real. The Icelandic people themselves have spoken: Can’t pay, won’t pay! It should become the rallying call around the world.
Gerry Gold
Economics editor
For revolutionary solutions to create a sustainable, not-for-profit economy in place of global capital alongside a real democracy based on People’s Assemblies. Visit our web site at www.aworldtowin.net
Showing posts with label Iceland. Show all posts
Showing posts with label Iceland. Show all posts
Wednesday, January 06, 2010
Monday, October 06, 2008
Political crisis takes centre stage
The scale and spread of the historically unprecedented disintegration of the world’s financial system, and its impact on global markets is beyond the control of any one government. And now it is equally clear that no co-ordinated action is possible either.
Events of the last few days reveal how the financial and economic emergency is immediately being reflected in political turbulence. Iceland is set to become the first of many failed states to be added to the lengthening list of failed banks while the European Union’s “joint response” agreed on Saturday lasted less than 24 hours as Germany took unilateral action to guarantee 100% of all deposits.
This was chancellor Merkel’s panic reaction to the collapse of Hypo Real Estate, one of the country’s biggest mortgage and public sector lender. Germany and Austria joined Ireland and Greece in their attempts to prevent a proliferation of the queues that formed last year outside Northern Rock as people withdrew their savings.
In Britain, an embryo national government is taking shape, with all the major parties close to agreeing to hand over taxpayers’ money directly to bankers in return for not very much at all.
As the value of its currency melted away, Geir Haarde, Iceland’s prime minister, was trying to put together at least a partial rescue package for his country’s shattered banking sector. He asked the trade unions to bring back their pensions investments from overseas and to accept a wage freeze. Meanwhile, the Belgian government confirmed on Sunday it would sell the parts of Fortis which were not nationalised last week by the Dutch government to BNP Paribas, the French bank. Also on Sunday, the Italian bank UniCredit approved the raising of €6bn in new capital as it moved to shore up its defences against a sliding share price.
On Friday, the US administration scraped a yes vote for its wholly inadequate $700 billion bail-out plan for the banks only by privately threatening martial law as the likely alternative as the popular revolt grew. Stock markets continued to fall, because the traders know that there’s no way out of a deep recession. The richest state of all, California, is warning that it will run out of funds by the end of the month, unless the federal government comes up with some cash.
In Britain, Gordon Brown has handed responsibility for the economy to an emergency National Economic Council – which includes unelected executives of leading corporations. Among them is Sir John Bond, the former HSBC boss, who led the bank into billions of pounds of debt in America's sub-prime housing meltdown. Just the man you need. Also present will be Paul Myners, the new minister for the City. He is on the board of GLG Partners, which made huge profits by "short selling" shares in Bradford & Bingley, which collapsed last week.
The council meets today for the first time under the direction of the equally unaccountable and ennobled Peter Mandelson. Mandelson’s return to government is part of New Labour’s attempt to show that it is committed to saving capitalism at all costs. As fellow cabinet minister Ed Miliband put it on hearing the news: “I think British business will be thinking, actually, Peter Mandelson's a good person to be in charge of our interests in government."
Hundreds of millions of people are suddenly discovering that their lives are being turned upside down by the crisis. Anger is rising as they see governments trying to rescue the bankers, financiers, speculators and gamblers, doing “whatever it takes” to stabilise a failing system while jobs are lost, homes repossessed and standards of living plummet.
Rather than allowing New Labour to hand the economy to the capitalist corporations, the challenge is to create a new democratic politics, a movement that can replace the anarchic crisis-prone profit system with one based on planned production for need. AWTW’s Stand Up for Your Rights festival on October 18 is an important step in that direction.
Gerry Gold
Economics editor
Events of the last few days reveal how the financial and economic emergency is immediately being reflected in political turbulence. Iceland is set to become the first of many failed states to be added to the lengthening list of failed banks while the European Union’s “joint response” agreed on Saturday lasted less than 24 hours as Germany took unilateral action to guarantee 100% of all deposits.
This was chancellor Merkel’s panic reaction to the collapse of Hypo Real Estate, one of the country’s biggest mortgage and public sector lender. Germany and Austria joined Ireland and Greece in their attempts to prevent a proliferation of the queues that formed last year outside Northern Rock as people withdrew their savings.
In Britain, an embryo national government is taking shape, with all the major parties close to agreeing to hand over taxpayers’ money directly to bankers in return for not very much at all.
As the value of its currency melted away, Geir Haarde, Iceland’s prime minister, was trying to put together at least a partial rescue package for his country’s shattered banking sector. He asked the trade unions to bring back their pensions investments from overseas and to accept a wage freeze. Meanwhile, the Belgian government confirmed on Sunday it would sell the parts of Fortis which were not nationalised last week by the Dutch government to BNP Paribas, the French bank. Also on Sunday, the Italian bank UniCredit approved the raising of €6bn in new capital as it moved to shore up its defences against a sliding share price.
On Friday, the US administration scraped a yes vote for its wholly inadequate $700 billion bail-out plan for the banks only by privately threatening martial law as the likely alternative as the popular revolt grew. Stock markets continued to fall, because the traders know that there’s no way out of a deep recession. The richest state of all, California, is warning that it will run out of funds by the end of the month, unless the federal government comes up with some cash.
In Britain, Gordon Brown has handed responsibility for the economy to an emergency National Economic Council – which includes unelected executives of leading corporations. Among them is Sir John Bond, the former HSBC boss, who led the bank into billions of pounds of debt in America's sub-prime housing meltdown. Just the man you need. Also present will be Paul Myners, the new minister for the City. He is on the board of GLG Partners, which made huge profits by "short selling" shares in Bradford & Bingley, which collapsed last week.
The council meets today for the first time under the direction of the equally unaccountable and ennobled Peter Mandelson. Mandelson’s return to government is part of New Labour’s attempt to show that it is committed to saving capitalism at all costs. As fellow cabinet minister Ed Miliband put it on hearing the news: “I think British business will be thinking, actually, Peter Mandelson's a good person to be in charge of our interests in government."
Hundreds of millions of people are suddenly discovering that their lives are being turned upside down by the crisis. Anger is rising as they see governments trying to rescue the bankers, financiers, speculators and gamblers, doing “whatever it takes” to stabilise a failing system while jobs are lost, homes repossessed and standards of living plummet.
Rather than allowing New Labour to hand the economy to the capitalist corporations, the challenge is to create a new democratic politics, a movement that can replace the anarchic crisis-prone profit system with one based on planned production for need. AWTW’s Stand Up for Your Rights festival on October 18 is an important step in that direction.
Gerry Gold
Economics editor
Wednesday, March 26, 2008
Credit chain breaks at weakest link
Hedge funds are not just investment opportunities open only to wealthy individuals. They also apparently come in the shape of Iceland. Now, pardon the pun, Iceland’s finances are in meltdown and it could be the first country to fall victim of a global credit crunch that shows no signs of abating.
Iceland has been dubbed a “giant hedge fund” because of the way in which the country’s corporate and banking sectors have expanded rapidly on borrowed money to give above average returns. Until the credit crunch, that is. Yesterday, Iceland’s central bank suddenly hiked up interest rates 1.25% to 15% in a bid to restore confidence in its currency and ward off full-scale economic crisis. It may be too late for the country of 300,000 people.
Its central bank blamed “deteriorating financial conditions in global markets” for the rate rise, which smacks more of panic than anything else. Confidence in the Icelandic krona has plummeted this year, falling 22% against the euro, driving up inflation to around 7%. Meanwhile, traders in so-called credit default swaps have pushed the cost of protecting the country’s three main banks’ debt against default sky high.
Iceland’s plight is a sure sign that the global financial chain is breaking apart, with the weakest and smallest going to the wall first. The intervention of the world’s central banks last week, when countless billions of dollars were thrown at the crisis and US bank Bear Stearns was forcibly taken over, is now being seen as the last despairing throw of the financial dice. And it has made no real difference. The cost of inter-bank borrowing has actually risen since that intervention. Banks are still reluctant to engage in inter-bank loans because they are uncertain whether they will ever get their money back.
While the stock markets are behaving as if nothing is amiss, with shares soaring in London, the latest data from the US economy confirms that things are badly awry. US consumers are at their most pessimistic for 35 years and house prices are falling at the fastest rate on record. Prices in 20 large cities fell by 10.7% in January compared with the same period last year.
What these cold statistics manifest is the economic recession that is now gripping America, which has only been staved off in the past by borrowing on a larger and larger scale, both by corporations, individuals and the federal government. When the financial musical chairs stopped last summer, many institutions were left with what used to be “non-performing loans”. This term was used to describe the Latin American debt crisis of the 1980s, where countries like Mexico were unable to repay the interest, let alone the capital, on their mammoth foreign loans.
Today’s financial crisis is a global phenomenon, afflicting every country, large or small. Iceland is the first sovereign state to face meltdown but it won’t be the last. Creating a new, stable monetary and financial system out of this chaos is clearly beyond the capacity of governments and central banks. For real solutions to this crisis, you should read A House of Cards, which we published recently, and then decide to do something about it.
Paul Feldman
AWTW communications editor
Iceland has been dubbed a “giant hedge fund” because of the way in which the country’s corporate and banking sectors have expanded rapidly on borrowed money to give above average returns. Until the credit crunch, that is. Yesterday, Iceland’s central bank suddenly hiked up interest rates 1.25% to 15% in a bid to restore confidence in its currency and ward off full-scale economic crisis. It may be too late for the country of 300,000 people.
Its central bank blamed “deteriorating financial conditions in global markets” for the rate rise, which smacks more of panic than anything else. Confidence in the Icelandic krona has plummeted this year, falling 22% against the euro, driving up inflation to around 7%. Meanwhile, traders in so-called credit default swaps have pushed the cost of protecting the country’s three main banks’ debt against default sky high.
Iceland’s plight is a sure sign that the global financial chain is breaking apart, with the weakest and smallest going to the wall first. The intervention of the world’s central banks last week, when countless billions of dollars were thrown at the crisis and US bank Bear Stearns was forcibly taken over, is now being seen as the last despairing throw of the financial dice. And it has made no real difference. The cost of inter-bank borrowing has actually risen since that intervention. Banks are still reluctant to engage in inter-bank loans because they are uncertain whether they will ever get their money back.
While the stock markets are behaving as if nothing is amiss, with shares soaring in London, the latest data from the US economy confirms that things are badly awry. US consumers are at their most pessimistic for 35 years and house prices are falling at the fastest rate on record. Prices in 20 large cities fell by 10.7% in January compared with the same period last year.
What these cold statistics manifest is the economic recession that is now gripping America, which has only been staved off in the past by borrowing on a larger and larger scale, both by corporations, individuals and the federal government. When the financial musical chairs stopped last summer, many institutions were left with what used to be “non-performing loans”. This term was used to describe the Latin American debt crisis of the 1980s, where countries like Mexico were unable to repay the interest, let alone the capital, on their mammoth foreign loans.
Today’s financial crisis is a global phenomenon, afflicting every country, large or small. Iceland is the first sovereign state to face meltdown but it won’t be the last. Creating a new, stable monetary and financial system out of this chaos is clearly beyond the capacity of governments and central banks. For real solutions to this crisis, you should read A House of Cards, which we published recently, and then decide to do something about it.
Paul Feldman
AWTW communications editor
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