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Classified cable from US Embassy Reykjavik on Icesave dated 13 Jan 2010

01/13/2010

FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

SIPDIS

TREASURY FOR SMART AND WINN, NSC FOR HOVENIER, DOD FOR FENTON

E.O. 12958: DECL: 01/13/2020
TAGS: ECON, EFIN, IC, PGOV, PREL
SUBJECT: LOOKING FOR ALTERNATIVES TO AN ICESAVE REFERENDUM

REF: REYKJAVIK 9

Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D)

1. (C) Summary. CDA met with Ministry of Foreign Affairs PermanentSecretary Einar Gunnarsson and Political Advisor Kristjan Guy BurgessJanuary 12 to discuss Icesave. After presenting a gloomy pictureof Iceland's future, the two officials asked for U.S. support. Theysaid that public comments of support from the U.S. or assistance ingetting the issue on the IMF agenda would be very much appreciated. Theyfurther said that they did not want to see the matter go to a nationalreferendum and that they were exploring other options for resolving theissue. The British Ambassador told CDA separately that he, as well as theMinistry of Finance, were also looking at options that would forestalla referendum. End Summary.

2. (C) CDA met with Permanent Secretary Einar Gunnarsson and PoliticalAdvisor Kristjan Guy Burgess at the Icelandic Ministry of Foreign Affairson January 12 for a two hour marathon meeting to discuss Icesave. TheIcelandic officials painted a very gloomy picture for Iceland'sfuture. They suggested that the most likely outcome for the countrywas that the Icesave issue would fail in a national referendum. Shouldthat occur, they suggested, Iceland would be back to square one withthe British and the Dutch. The country, however, would be much worseoff because it would have lost international credibility and access tofinancial markets. Gunnarsson suggested that the Icesave issue, if itcontinues along its present course, would cause Iceland to default in 2011when a number of loans become due and could set Iceland back 30 years.

3. (C) The two government officials stressed that Iceland needsinternational support. CDA reiterated that the United States was neutralon this bilateral issue and hoped for a speedy resolution. Moreover,the U.S. had supported Iceland's position at the last IMF Review andexpected to do so again depending on the circumstances. Gunnarsson andBurgess responded that they understood the United States' stated positionof neutrality on the issue; however, they expressed the view that itwas impossible to remain neutral regarding the Icesave matter. Iceland,they said, was being bullied by two much larger powers and a positionof neutrality was tantamount to watching the bullying take place. Theysuggested that a public statement from the U.S. in support of Icelandwould be very helpful. They also felt that U.S. intervention in theIMF could be of assistance, specifically if it was targeted at gettingIceland's review placed on the IMF agenda. Gunnarsson acknowledged thatU.S. support during the review was appreciated but, realistically,the issue would never make it on the agenda unless external pressurewas applied on the IMF.

4. (C) Gunnarsson and Burgess were extremely pessimistic regardingthe national referendum and said that the Government of Iceland wasexploring other options to resolve the Icesave situation. They hintedthat renegotiation might be a viable alternative and referenced recentmeetings between the government and the opposition at which this optionwas discussed. Everyone could potentially save face, they suggested,if a new repayment agreement was reached with the British and Dutch thatcould possibly include a lower interest rate for the loan. This solution,they felt, would be palatable to the Icelandic people and potentiallyto the opposition as well. They did not know, however, whether theBritish and Dutch would agree to another round of negotiations. Theyalso acknowledged that any new agreement would have to be approved inparliament and, of course, signed by the president.

5. (C) On January 13, CDA also discussed the situation with BritishAmbassador Ian Whiting who said that Britain might consider options thatwould forestall a national referendum on the Icesave issue. The Ambassadorsaid, however, that the British Government was receiving mixed messagesfrom the Icelanders who, one week ago, seemed content to move forward witha referendum (as the Prime Minister had conveyed to her UK counterpart)but now appeared to be looking at other options. For example, the Ministryof Finance was already looking at ways to improve the agreement but notundermine the obligation or certainty of payment. He outlined for CDAa potential solution that he was exploring that would involve Norwayloaning Iceland the money to cover the Icesave debt. This idea, he felt,had merit because it would create a situation in which the IcelandicGovernment was dealing with a country that it perceived to be sympatheticto its situation, a fact that could remove some of the animosity from therenegotiations. Negotiating a good loan repayment agreement with Norway,said Whiting, would allow both sides to claim victory. The British andDutch would receive their money and Iceland would be able to repay itsdebts under more favorable terms. He was going to discuss the idea withthe Norwegian Ambassador that same day.

6. (C) On January 13, CDA also met Iceland's Ambassador to the UnitedStates Hjalmar Hannesson who was in Iceland. The Ambassador describedthe potential constitutional crisis that would likely ensue should thereferendum go forward and fail, in essence a vote of no confidence. Inthat case, the constitutionally apolitical Head of State would havebrought down the elected government, a possibility that several formerpoliticians in both parties had long ago agreed should not happen. Despitehis and his family's long association with the Progressive Party,Hannesson said that this was not the time for elections or a change ofgovernment. He added that he did not sense a willingness on the partof the opposition to take control of the government. Noting that thePresident, whom he has known for years, is considered "unpredictable,"he hoped that a solution palatable to all sides in Iceland could providea way out.

7. (C) Comment: It is quickly becoming clear that very few of theinvolved parties are comfortable with the Icesave issue being put toa vote in a national referendum. Both the ruling coalition and theopposition appear to understand that they must present a united frontfor there to be any possibility of discussing alternative solutions withthe British and Dutch. At present, such cooperation remains elusive;however, a number of closed door meetings between the opposition andgovernment will take place in the coming days to explore the full rangeof potential solutions and, hopefully, to forge consensus. All of this,however, remains in flux.  WATSON

Vildu ekki þjóðaratkvæði

Athugasemdir

[corvus corax, 19.2.2010 kl. 08:03]

Svikahyski! Gerir allt til að koma í veg fyrir lýðræðið! Og það kemur Icesaveógeðinu ekkert við. Þetta er stefna ríkisstjórnarinnar ...ekkert lýðræði hér á landi. Í anda flokksráðsfundar VG á Akureyri þar sem foringinn krafðist þess að allir flokksmenn hugsuðu eins og hann sjálfur. Að ganga í takt var það kallað.

[Björn Heiðdal, 19.2.2010 kl. 09:06]

Af hverju vilja Bretar lika koma í veg fyrir þessa þjóðaratkvæðagreiðslu.  Þeir eru svo hræddir að sendiherranum datt í hug að leita á náðir Norðmanna. 

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