Tag Archives: Germany

A tale of two countries – Britain and Germany – in treatment of Iceland

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The UK, to our enduring shame, used anti-terrorist legislation to seize the UK assets of Icelandic banks judged to be failing. One of the banks, Kaupthing, says that this action by the British Financial Services Authority (FSA) forced it into a bankruptcy it might otherwise have avoided. Kaupthing is suing the FSA with the support of the Icelandic Government and says that it will take its case to Europe if necessary.

The reaction of German investors has been very different. It was reported today (10th February) that around 30,000 German investors had a total of around US$426 million in Kaupthing when it went down last October.

A group representing these account holders came to Iceland to
discuss the situation with Icelandic authorities and met the Minister
of Business Affairs Gylfi Magnússon on Friday 6th February. 

Karlheinz Bellmann, one of the group, came to Iceland to seek compensaation last November after the collape of Kaupthing. He saw then, at first hand, the suffering of many Icelanders hit hard by the crisis and decided to return and contribute to Icelandic society. He says Germans are generally compassionate towards Icelanders and the difficulties they are facing.

A group of the German investors who have lost their money has made an initial gesture of support when they were in Iceland on Frday last, donating a total of around US$1,300 and sweets to a Reykjavik charity, Maedrastyrksnefnd, which distributes food to needy residents.

German Government fully guarantees bank savings, UK predicted to follow shortly

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Germany is to guarantee all private savings in German banks, although the detail of their proposal remains undefined. This action by one of the big European powers in following the direction of Ireland to secure its financial system is thought likely to propel the UK Chancellor into the same position very shortly. In the face of pretty concerted calls for action, Alastair Darling has now said that he’s now prepared to ‘take some pretty big steps’ to stabilise the banking system.

The last few days have seen concerted anger by the major Euriopean powers directed first at Ireland and then at Greece as both small countries safeguarded their financial systems by offering full guarantees of bank deposits. Ireland was reported by the British Bankers’ Association (BBA) to the EU for investigation under EU Anti-competition laws. Fred Goodwin, CEO of the Royal Bank of Scotland (RBS), reportedly ‘furious’, directly asked the FSA to reprimand Ireland. Ireland passed its action into law and offered to consider other banks with significant numbers of Irish customers for the guarantee, on applcation and on a case by case basis. Interestingly – and logically, this olive branch was first extended to a subsidiary of RBS, the Ulster Bank. HBOS then announced that it was to apply for consideration to be included in the Irish guarantee.

Saturday’s emergency finance summit of European leaders heard a lot of huffing and puffing about the unilateral action taken by Ireland and Greece, about the need for a common line on rescues and safeguards – but no agreement for a Europe-wide rescue fund. Angela Merkel, the German Chancellor, was one of those notably grumpy with Ireland.

Now Germany – unilaterally – and announced by none other than Angela Merkel, is to take the Irish line and guarantee deposits in German banks. Other governments, including the UK, will have little option but to tag along.

The German decision was accelerated by its second biggest commercial property lender, Hypo Real Estate, running into trouble after the failure of a £27.2 billion rescue plan.