In a major victory for taxpayers in Iceland, an obscure transnational court ruled against the European Union and a similar supranational body last week, deciding that the tiny population of the island nation was not responsible for the massive liabilities of a private Icelandic bank that went bust during the 2008 economic meltdown. Establishment analystsblasted the decision as a “blow to global banking,” but Icelanders and proponents of the free market celebrated the verdict as a big win for the people and market principles — after all, they argue, citizens should not be forced to pay for the reckless and potentially criminal actions of a few bankers, widely criticized as “banksters” in recent years.
The Luxembourg-based European Free Trade Association (EFTA) court, of which the Icelandic government is a member, issued its landmark ruling on January 28 addressing two key charges against national authorities. Despite Iceland’s not being a member of the EU, one of the cases against the country was filed by the European Commission, a sort of “executive branch” in the sprawling, increasingly powerful, and out-of-control European superstate. The EFTA “Surveillance Authority” also filed a case alleging a violation of its rules.
The first complaint was that the Icelandic government failed to obey an EU directive ordering it to pay about $25,000 worth of “insurance” to every foreign depositor by extracting it from domestic taxpayers — a proposition that would have devastated the 300,000 or so Icelandic citizens and their already-ruined economy for generations to come. While the bankrupt bank’s assets have been used to compensate foreign depositors, the EFTA court ruled that citizens were not responsible for the liabilities.
The EU dictate in question, which Iceland is supposed to subscribe to because of its membership in the European Economic Area (EEA), “does not lay down an obligation on the State and its authorities to ensure compensation if a deposit guarantee scheme is unable to cope with its obligations in the event of a systemic crisis,” the EFTA court ruling said. The verdict is final and cannot be appealed to any other court, meaning Iceland emerged victorious after years after wrangling with authorities in Europe.
The bank in question, Landsbanki, had foreign online branches under the brand “Icesave” for depositors in Europe. The subsidiaries accepted deposits from customers in both the United Kingdom and the Netherlands. When the economic crisis struck in 2008, however, the huge Icelandic bank collapsed. The U.K. and Dutch governments stepped in to cover the lost deposits of their subjects, but both governments later sought to force Icelandic taxpayers to repay the cost of the bailouts plus huge sums of interest.
When the people of Iceland said no way, twice — over nine out of 10 voters rejected what critics had said was tantamount to “debt slavery” in a referendum — authorities on the continent would not give up. “This is a strong ‘No’ from the Icelandic nation,” saideconomist Magnus Arni Skulason with InDefence, a group which rallied opposition to the bailout scheme, after the vote. “The Icelandic public understands that we are sovereign and we have to be treated like a sovereign nation — not being bullied like the British and the Dutch have been doing.” (Speaking of sovereignty, Iceland recently expelled a team of FBI agents trying to investigate the activities of WikiLeaks, according to news reports.)
The banking case and the referendums, however, sparked an international diplomatic furor, with U.K. officials abusing “terror” laws to seize Icelandic assets in Britain. Finally, the international disputes ended up in the EFTA court, with Iceland defending itself from hostile European authorities demanding huge sums of cash from innocent Icelanders who had nothing to do with the privately owned failed bank.
Advocates of free markets and national sovereignty have long suggested radical reforms in the banking sector — abolishing central banks and all of the inherent problems that come with them, allowing banks and consumers to make their own decisions and accept responsibility for the consequences, and more. However, while Icelanders may have been saved from massive debts and transnational decrees this time, the same flawed system remains in place, and experts say the next crisis could be just around the corner — and a lot worse than the recent one.
dailyalternative | alternative news -Icelandic Taxpayers Win Key Case Against European Establishment