President of Iceland Ólafur Ragnar Grímsson said officials in the UK and the Netherlands are misunderstanding the situation which has come up after Icelanders rejected the new Icesave legislation. He also criticized the conduct of rating agencies, especially Moody’s.
President of Iceland Ólafur Ragnar Grímsson. Copyright: Icelandic Photo Agency.
He made these statements in a telephone interview broadcast by Bloomberg yesterday. The interview referenced the reaction of the British and Dutch finance ministers who said their nations wouldn’t give up until they have reclaimed all the capital to which they are entitled because of the collapse of Landsbanki, ruv.is reports.
Grímsson said he didn’t understand why the ministers indicated that they might not receive any repayment. The fact is that both the UK and the Netherlands will obtain more than ISK 1,000 billion (USD 8.9 billion, EUR 6.1 billion) from the Landsbanki bankruptcy estate with the first payment being scheduled this summer, he stated.
As for the rating agencies, the president said Moody’s had a poor history of evaluating the strength of the Icelandic economy; when the banks were struggling, Moody’s rated them with AAA.
When asked about his reaction to the president’s comments, governor of the Central Bank of Iceland, Már Gudmundsson, told RÚV, “It isn’t a question of how we see them. It is a question of how the parties we intend to borrow capital from see them.”
Gudmundsson said Moody’s has agreed to postpone its new credit rating for Iceland until next week. Icelandic officials have invited the agency’s representatives to a meeting in Washington DC next Sunday.
Many investments, such as the European Investment Bank’s financing of a large part of the Búdarhálsvirkjun power plant, depend on the credit rating of the Icelandic state remaining stable.
Meanwhile, Fitch Ratings decided not to lower Iceland’s credit rating, as announced yesterday. The rating remains at BBB- after dropping from BB+ when the president referred the new Icesave legislation to a national referendum in January, ruv.is reports.
However, the referendum’s outcome could delay the increase of Iceland’s credit rating. Paul Rawkins, the agency’s supervisor, assumes that the Icesave dispute will now be taken to the EFTA Court and that it will take one and a half years before a conclusion can be reached. He expects the proceedings to delay Iceland’s economic recovery.
Click here to read more about Icesave.