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Iceland blames financial collapse on UK’s ‘unreasonable demands’
Senior members of Iceland’s former government have accused the UK of making "unreasonable demands" in the run-up to the financial crisis that doomed attempts to rescue one of the country’s biggest banks.

Geir Haarde, an economist, is the first politician worldwide to go to trial for the part he played in the global financial crisis Photo: Eddie Mulholland By Richard Orange, in Malmo
8:50PM GMT 06 Mar 2012
On the second day of the trial of Geir Haarde, the country’s prime minister during the country’s banking collapse, Bjorgvin Sigurdsson, the country’s former trade minister, was sharply critical of the stance taken by former Chancellor Alastair Darling and the Financial Services Authority (FSA).

"I do not know how in the world Darling thought that 300,000 people should take on hundreds of billions worth of debt," he told the court.

In the months leading up to the October 2008 collapse, Iceland’s officials faced constantly increasing demands from the FSA for assets Landsbanki, a leading Icelandic private bank, would need to offer as collateral in return for putting Icesave, its UK subsidiary, under the UK’s Financial Services Compensation Scheme, which guarantees bank customers’ deposits.

"The requirements of the FSA were completely unrealistic, and would always lead to the collapse of Landsbanki. You could not implement them," said Mr Sigurdsson.

Mr Haarde is the first politician worldwide to go to trial for the part he played in the global financial crisis, in what he describes as "a political vendetta" mounted by the ruling Social Democrats. As he took the stand on Monday, the 60-year-old economist rejected the charge that he had been negligent in the period leading up to the crisis in October 2008, when three of Iceland’s major commercial banks collapsed. This burdened the Nordic island state with more than €50bn (£42bn) in external debt and forced it to take emergency loans of around $10bn (£6.3bn) from the International Monetary Fund and other lenders.

Mr Haarde also criticised the FSA’s tough negotiating stance, protesting that "their demands increased with every letter they wrote".

Many in Iceland still rankle at Mr Darling’s decision to use UK anti-terror legislation to freeze the UK assets of Landsbanki. The country’s voters have twice rejected deals struck with the UK and the Netherlands to help Iceland pay back the €4bn (£3.3bn) the two countries claim they are owed for stepping in to pay back the deposits of Landsbanki’s UK and Dutch customers.

But even those who oppose the deal believe the trial of Mr Haarde is political.

"It’s a general belief even in parliament that the government just has a lot of grudges, and that it’s a political play," said Frosti Sigurjonsson, one of the leading "no" campaigners in the two referendums. "It’s a big mistake and I’m sure he’s going to be found innocent, but lots of information will come out."

David Oddson, a former prime minister who was chairman of Iceland’s Central Bank at the time of the crisis, backed up Mr Haarde as he took the stand after Mr Sigurdsson.

"I am not making any negative judgment over Mr Haarde. I realise the problem which was in front of us. The only possible thing that he could have done was to resign."

http://www.telegraph.co.uk/finance/fina … mands.html

Statistics: Posted by yoda — Tue Mar 06, 2012 7:38 pm