Press release

EFTA court dismisses ’Icesave’ claims against Iceland and its people

28 January 2013 by CADTM

It is with some satisfaction that CADTM learns of the decision by the EFTA (European Free Trade Association) [1] court to dismiss all the complaints brought by the Netherlands and the UK against Iceland in the Icesave case. [2]

The judgement clearly states that it is not the responsibility of the parent nation of a banking company to cover the costs of the guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). to their banking system, and the safety net structure must be financed by the banks themselves. This implicitly confirms that the normal liquidation process, as applied to ’Landsbanki’ (Icesave’s mother company) is quite correct when a bank, even too big to fail, has greater liabilities Liabilities The part of the balance-sheet that comprises the resources available to a company (equity provided by the partners, provisions for risks and charges, debts). than assets. Which would be the case of most of the big European banks if the toxic assets Toxic assets An asset that becomes illiquid when its secondary market disappears. Toxic assets cannot be sold, as they are often guaranteed to lose money. The term “toxic asset” was coined in the financial crisis of 2008/09, in regards to mortgage-backed securities, collateralized debt obligations and credit default swaps, all of which could not be sold after they exposed their holders to massive losses. on their balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheets were counted at their real value.

This is the contrary to that which has happened in favour of bank welfare since the beginning of the recurring financial crises from 2007 onwards. The governments of the industrialised countries have put up the collateral Collateral Transferable assets or a guarantee serving as security against the repayment of a loan, should the borrower default. for their failing banks, unjustifiably using public money to ease bank cash flows at the same time as they have insisted that the situation is the fault of the population who must pay the damage through pay cuts, reduced social cover, job insecurity and degraded working conditions. The people are not to blame and are not in agreement with the austerity measures imposed on them. This decision demonstrates the legitimate nature of the people’s opinions and in so doing shows up the illegitimate nature of these austerity measures.

The European banking system is still holding its breath, waiting for the day its toxic assets mature and may no longer be hidden. At that moment the population will be asked (or rather ordered) to bail them out again. The governments, through the structures that have since been put into place will go cap in hand to the financial markets to borrow their own money to give back to the banks that hold the toxic assets. With the EFTA decision we now know it is not the people’s (Greek, Irish, Portuguese or any other’s) responsibility to do this and the will of the governments to do so is complicity with the banks.

Financial crises will continue unless the banks are expropriated without compensation, socialised under popular and democratic control, and used to finance the needs of the population rather than the desires of the financial markets. It is also necessary to identify, through citizens’ debt audits, the part of public debt that is illegitimate, particularly that part which is the result of bank bail-out measures, so that it may be abolished.

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