economics politics

Ireland versus Iceland

Iceland would win. Consider what has happened to these 2 countries since 2008. Iceland are not part of the EU and held a public referendum to accept the terms of a repayment deal for money lent by British and Dutch governments as a result of the IceSave crisis.The public rejected the initial terms of the deal (93% against) and the government used this result to negotiate a new and more favorable deal.

Let’s look at the terms. They’re paying fixed rates to both NL and UK. 3% to the Netherlands on £1.2Bn STG and 3.3% to the UK on £2.3 Bn STG. Good terms so far but it gets even better. Payments will not begin until July 2016 and cannot continue beyond 2046. Iceland has also secured a limit on the amount it is expected to pay out relative to its national growth. Payments cannot be lower than 1.3% of Iceland’s GDP nor exceed 5%.

This is SOCIAL JUSTICE IN ACTION. A deal that actually protects the interest of the people. A keeping of the social contract. Not the frankly treasonous terms that we’ve been landed/shafted with.

What did Ireland get. We’re being forced to guarantee debts on banks we can’t afford to, pushing up our borrowing rate to the point where we had to seek a bailout, and to pay 5.8% interest on an 85Bn loan to our supposed European allies as part (notionally) of a stability deal. As Paul Krugman points out, this is  the rate we could borrow at in September 2010. So if this is a bailout/favour…

Indeed, anyone who still feels this is a good or sensible thing to do read Krugman’s “Worse than a Crime” comments. I’m hopeful that those in Irish politics will stop trying to pretend that they understand what they’re doing or that they know better than a Nobel prizewinning economist.

Look at Ireland again and you’ll see another set of savage cuts into a 40% deficit reduction package. A country on the ropes. People at odds with a government reliant on independents (being promised sun+moon & casinos???) to pass a willfully unjust budgets. Indeed there’s no point in mincing words. The behaviour of some independent TD’s during the politicking surrounding the bailout and austerity budget has been shameful.

What about the relative health of the economies. Our bond rates? Ireland’s bond rates are still high. 10 year bonds at 8+%. The closest to a 10 year bond I can find for Iceland (~9 years) is at ~5.6%.  So their bond rates have dropped sharply and their economy is coming out of recession (1.2 % growth in Q3 2010) with an affordable deal to pay back their debts. All this done by politicians acting in the national interest and a president who empowered the people to decide the repayment terms they’d accept.

So those Irish politicians who scoffed at Iceland should perhaps realise that they’ve made crap decision followed by crap decision which has pushed the date of recovery off into the distant future. They ignored every naysayer in the run up to and during this recession. They are the country bumpkins of Europe and unfit to hold office, anywhere. Thanks are also due to the great help we received from our European buddies under the misguidance of the commission and the ECB. Thanks guys. My generation owes you one.