"No need to despair," says Iceland's PM Skip to content

“No need to despair,” says Iceland’s PM

Morgunbladid reports on its website the comments of Prime Minister Halldór Ásgrímsson at a public meeting held at Reykjavík University at noon today.

Halldór observed that Icelandic financial markets had been volatile lately; if Iceland wished to preserve its good name then it was imperative to preserve stability and a “good working climate,” said Halldór.

Halldór also said that the Icelandic króna had appreciated in morning trading, and that there was “no need to despair”.

Halldór said that the Icelandic Central Bank and the Icelandic Financial Supervisory Authority, together with international rating companies, had confirmed that the Icelandic financial system was “sound”. He further observed that the Icelandic banks had assets to match their liabilities and that the Icelandic treasury was almost free of debt. The government was in a good position to serve as a lender of last resort and the banks were aware of that. “In my view, the banks must slow down, and that’s what they are doing,” said Halldór.

Halldór further observed that it was important to “create jobs” for the graduates of Reykjavík University. They must learn how to start companies and manage them.

Morgunbladid referred to the prime minister’s comments earlier this month at the annual general meeting of the Icelandic Chamber of Commerce that international financial services could present an important opportunity for Iceland. Government and business should unite to create a financial center in Iceland comparable to the UK, the Netherlands, Ireland, Luxembourg and Switzerland.

Halldór said today that he had appointed a committee, headed by Sigurdur Einarsson, the chairman of Kaupthing (KB-Bank), to analyze the position of Iceland vis a vis such international financial centers as Luxembourg. The committee had the mandate to draft relevant legislation.

According to Morgunbladid, Halldór said that, because of the current discussion about the position of the Icelandic banks, this was perhaps “not the right time” to discuss turning Iceland into an international financial center. “Everything is about to slow down,” said Halldór according to Morgunbladid. Iceland must learn from the developments, he said, and the Icelandic króna would always present difficulties.

“There are always opportunities embedded in adversity,” said the Prime Minister at the lunch meeting at Reykjavík University today, reported Morgunbladid.

Over the past days and weeks, Halldór Ásgrímsson has been frequently interviewed by the local media about the current state of the Icelandic financial markets.

In the Sunday edition of Morgunbladid, Halldór said he did not know what exactly was happening in the markets. Among other things the Prime Minister said: “There can be great hysteria, with people all over the world sitting in front of monitors and computers, and there are all kinds of things being communicated, and at times the action can be too fast for anyone to handle. The Danish Minister of Finance once said that men in the financial arena often acted like hysterical women, and was criticized for his remarks, and that conforms to my experience that we men can be more hysterical than women, but it is quite right that often there is much ado in the financial markets. And over the past few days there have been conflicting signals. Many have come from parties that are not familiar with the Icelandic economy. I am not aware of that Danske Bank has conducted any business to speak of here in Iceland nor that people from that company have any knowledge of this market. I ask: Why are they issuing a report on Iceland? I don’t quite get it. Why are people who have never conducted a single interview in Iceland issuing reports on [on Iceland].”

Last Friday, Halldór Ásgrímsson said on Icelandic National Broadcasting Service, RÚV, that “wrong and misleading” coverage of the Icelandic economy could be “dangerous”. According to RÚV, he was referring specifically to a report recently issued by the Danske Bank.

According to RÚV, Halldór said he was not particularly worried by the exchange rate of the Icelandic króna nor the fact that several US investment funds had decided to redeem bonds issued by the Icelandic banks for amounts corresponding to “tens of billions of króna”.

(Separately, RÚV reported that the total face value of bonds issued by Icelandic banks and canceled by US investors last week amounted to ISK 116 billion, whereof ISK 57 billion were bonds issued by Glitnir, Íslandsbanki, and ISK 45 billion bonds issued by Kaupthing, KB-Bank.)

According to RÚV, the Prime Minister was primarily concerned with “misleading” foreign coverage [of the Icelandic economy]. He did not fear the report by Danske Bank, he said to RÚV, because it was “not credible”. Instead, Danske Bank should have learned from its mistakes in the Faroe Islands, said Halldór Ásgrímsson to RÚV last Friday. He “reprimanded” Danske Bank for its coverage.

Halldór Ásgrímsson is the chairman of the Progressive Party. According to a Gallup poll published earlier this month, the Progressive Party currently polls at 9%, second to last of the five parties in parliament.

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