Although we are only in the first week of 2010, we are
confident that our Statesman of the Year will be Olafur
His splendid Viking name alone is enough to make him worthy
of consideration, but what really makes the President of Iceland deserving of
the honour is how he stands up for the interests of his people against the “international
financial community” – an oxymoron if ever there was one.
He has just vetoed a bill that
would have obliged Icelandic taxpayers to pay the governments of the United
Kingdom and the Netherlands for compensating their own citizens who lost money when
private banks based in Iceland collapsed.
There is no merit in the claims of the governments of the United
Kingdom and the Netherlands. It was their choice to compensate voters within
their jurisdictions for what happened outside their jurisdictions.
Those citizens, in their turn, chose to put their money into
the Icelandic banks, motivated by the prospect of higher interest rates – and
knowing that the Icelandic government was not guaranteeing their deposits. They
thought they were being clever. They were not. They have only themselves to
blame. They must accept responsibility for their losses.
One of the lessons of the banking crash may be that
governments should develop schemes like the American Federal Deposit Insurance
– but that is for the future. To demand it retrospectively of the Icelanders is
This blog supported the bank bail out of 2008 – very, very
reluctantly – not because it was right but because it was necessary. Only the
American government was big enough to extend a line of credit that prevented
This should not be taken as establishing a general principle
that taxpayers are responsible for uninsured deposits.
Now that the immediate crisis is past, the only way to
restore the global banking system to long term health is to restore
responsibility. That means bankers, depositors, and borrowers must all accept
the consequences of their actions, and not expect their mistakes to be added to
the national debt of the nearest convenient country.