“The rebuilding of the banks must be an absolute priority. For the business sector to work, it must be supported by banks that work. But it will be expensive. I don’t think Icelanders realize how expensive that is going to be, around 85% of gross national product. “
Mats Josefsson to Swedish newspaper Uppsala Nya Tidning
Josefsson who is one of the foremost experts on banking crisis in Europe threatened to quit his position as the chair of the committee assigned to rebuild the banking system in Iceland. He is critical of the government for a lack of a clear vision on how to approach the problems and how slow it is taking to get things done.
He seems especially dissatisfied with the fact that his recommendation regarding creating a special state owned entity that would take over hugely indebted businesses and work their problems out in co-operation with the banks. Instead the banks are forming their own, with no clear rules about how to tackle these instances and lacking in transparancy.
Yet another evidence that the problems of Iceland are probably too huge for Icelandic politicians to handle. That figure exclaimed by Josefsson is significantly higher than what the government has been claiming, or 1.250 billion ISK instead of 385 billion ISK. Where does that huge gap come from.
Disillusion is one thing, lacking touch with reality is another. Thor Saari, MP for the Citizen’s Movement describes how 20 persons from different sectors were called before a congressional committee to discuss the situation in the economy. According to Thor, only three out of those people seemed to grasp that Iceland had been hit by an economic hurricane, but others seemed oblivious to that fact and delusionally wishful even that things were just as they were before. They were still completely sure that they were the right people to keep running the country’s largest corporations.
They might change their tone soon because the unions have received word to prepare for 5,000 layoffs in the next couple of months. Add to that figure the slicing and dicing of the banking system and there might be 500-1,000 more jobs lost in the summer.
And now there are talks of placing the exchange rate of the ISK at the index rate of 170 from the current high of 230. It might benefit some businesses with foreign currency loans for a while but the real cost of such an operation might end up being astronomical. Lets remember how long it took for the last attempt to fall on top of itself.
But hey, at least the sun is shining!
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Roy
2 years ago
With the inflation rate higher than savings accounts are paying, it´s only a matter of time before there is a total collapse of the financial system! The politicians had better get a grip and soon.