Iceland: the citizen revolt that manages to forgive mortgage banking
The way to tackle the financial crisis in Iceland, as well as successful as evidenced by the latest rise in ratings, is becoming more distinct from the rest of Europe (and Western). Icelanders, who came to stone the Parliament in 2009, are reaping the fruits of their fury in the form of debt forgiveness by the domestic banking.
As recorded by the U.S. agency Bloomberg citing the Icelandic Financial Services Association (banking association in the country), since late 2008, Icelandic banks have forgiven loans for a value equal to 13% of GDP, debt reduciendendo more than a quarter population.
"You can safely say that Iceland has the world record for domestic debt reduction," said Lars Christensen, chief economist for emerging markets at Danske Bank. "Iceland followed the textbook that is required in a crisis. Any economist would agree with that."
The steps for the resurrection of Iceland since his bank did default in 2008 by a total of 85,000 million dollars are proving to be effective: the country will grow faster than the Eurozone and the OECD average and CDS (insurance against default debt) are at the level of Belgium. The strong trend of opinion in favor of entry into the euro has reversed.
And how have they achieved that banks write off the debt? Icelandic households have benefited from the agreement between the government and banking, which is still partially contraloda by the State, to forgive some debts that exceed 110% of the value of their homes.
In addition, the country's Supreme Court ruled in June 2010 that foreign currency indexed loans were illegal, which meant that families did not have to cover more losses from its currency devalued as a result of its financial crisis.
"The lesson to be learned from the Icelandic crisis is that if other countries think it is necessary to reduce the value of their debts, they should look at how successful has been the agreement of 110% here," said Thorolfur Matthiasson, Professor of Economics at the University of Iceland. Without debt relief household, homeowners would have been buried under the weight of their claims after the debt / income ratio reached 240% in 2008, he adds.
Iceland's economy, with a value of 13,000 million dollars, which contracted by 6.7% in 2009, grew 2.9% last year and will this year by 2.4%, according to the latest forecast OECD. The house also has not collapsed: The price is only 3% below their values of September 2008, just before the start of the financial collapse of the country.A different answer, but successful
The agency Fitch, which raised to investment grade debt in the country with a stable outlook, acknowledged that the "unorthodox" response to the crisis Iceland had won. This has resulted in heterodoxy that the Government has always put the needs of their people ahead of the market, as reasons the U.S. agency.
Once it became clear in 2008 that it was impossible to rescue banks, the government stepped in front, protected the accounts of citizens and international creditors left in the lurch. The central bank imposed capital controls to prevent the collapse of the crown and created new state-controlled banks with the remnants of the ancients.
However, some activists believe that this small country debt relief are not enough and question the figures that he gave the bank. Andrea J. Olafsdottir, president of the Icelandic Association Homes Coalition, believes the numbers are reliable, and that "there are indications that some financial institutions have not lost a penny with the measures."
However, since banks remains that even the level of debt forgiveness that estimates the Financial Services Association is greater, as the published figure only includes cases in which judicial intervention has been
Icelandic citizens were the forerunners of the social movements that have spread after the Western world. After the collapse of late 2008, the protest grew and riots forced the police to use tear gas to disperse the demonstrators who threw stones at the Parliament and the offices of then Prime Minister Geir Haarde.
Indeed, Parliament has yet to rule on legal proceedings against Haarde for his role in the country's financial crisis. The new government that took office in early 2009 is still investigating the majority of players in the crisis, including the big bankers who sobredimensionaron the financial system.As concluded Christensen, Danske Bank economist, "the result is that if households are insolvent, the banks simply have to accept it, regardless of their interests."
