Britain has no right to demand money back from Iceland. In fact, we should give them cashby Mark Hannam / January 27, 2010 / Leave a comment
Published in February 2010 issue of Prospect Magazine
In 1997 the late Robin Cook, then foreign secretary, talked of a foreign policy with “an ethical dimension.” Many were unclear what he meant, but we can be sure he did not mean bullying a small European neighbour into accepting years of economic austerity or international isolation.
The British government does not present its policy towards Iceland in this light. We are, it says, negotiating reasonable terms for the repayment of monies due. Iceland’s banks failed in 2008, and the Icelandic depositor protection scheme was insufficiently funded to repay British investors. Our government stepped in to cover the losses. Now the Icelandic people should reimburse the British for any losses. Right?
Wrong. The government’s stance stems from the public’s willingness to applaud bashing foreigners, and has little economic or moral basis. No one in Britain was forced to invest in Icelandic banks. Those who put money into Icesave did so for high returns, either discounting the risks, or failing to consider them. It’s not even clear why the British government covered their losses in full; it was not obliged to. Maybe it felt guilty: neither the Financial Services Authority nor the treasury warned investors against using banks outside the EU, and where national deposit protection schemes were inadequate.