Saturday 20 February 2010

Hannan responds with a plea for Iceland

Daniel Hannan has maintained a courteous approach to the intellectual stalking which Next Left attempts of his ideological project.

So he has now responded by answering our "Did the collapse of Iceland's economy lead you to change your mind in any important way?" question.

Hannan writes:

Still, as a dog that returneth to his vomit, Sunder returns to my pro-Iceland stance yet again, asking whether the collapse in that cold country has led me to reconsider my support for Euro-sceptic capitalism, and whether I now believe that the problem was too little regulation rather than too much.

In short, Hannanism survives:

The short answer is that, under the terms of the European Economic Area, one of the few aspects of Icelandic law that had passed almost wholly under EU jurisdiction was the regulation of financial services. This point cannot be repeated too often.

There is more detail in the Telegraph post.

Unsurprisingly, I am sceptical about this defence.

In October 2004, the Hannan explanation of a unique Icelandic prosperity was that "they have no more desire to submit to international than to national regulation". That surely remained, in 2008, the distinctive feature of Iceland in comparative perspective.

Nor am I persuaded by the idea that the UK government's response during the Icelandic collapse proved decisive in the course of events as the astonishing financial overreach of the country's three global mega-banks unwinded. (None of the Icelanders interviewed in Michael Lewis' in-depth Vanity Fair feature about the collapse mention the British role).

However, Hannan has a contemporary argument too about what the fair treatment of Iceland now should be, and thinks he might on this point persuade some here on the left too.

Of course, I don’t expect to convince Sunder or the readers of Next Left in this post. Our disagreement goes way beyond Iceland: the chief difference between Left and Right turns on our attitude to state intervention – an issue on which good people, acting from decent motives, can disagree.

I hope, though, that I might persuade at least some Next Left readers of something else: that there is neither sense nor honour in the repayment terms that we are demanding from Iceland.

To repeat, Gordon Brown, by collapsing the last solvent Icelandic bank through anti-terrorism laws, massively exacerbated that country’s difficulties, and made it far harder for it to meet its debts. None the less, all Icelandic parties accept that they must stand by their obligations and satisfy their creditors. Is it really reasonable, in the circs, to charge a 5.5 per cent interest rate, at a time when global interest rates are barely above zero?

Faisal Islam has an interesting Guardian column today which spreads the blame around, and notes the even gloomier prospects for Iceland if no deal is done and the repayment bill is rejected in a forthcoming referendum.

UPDATE: Reuters report that the British and Dutch are about to table a revised deal to Iceland on Saturday, to specifically address the concern about the interest rate:

Speaking on condition of anonymity, the source familiar with the situation said the offer's main feature is a floating interest rate designed to ease Iceland's burden as it repays $5 billion (3.24 billion pounds) to the two European Union countries.

The offer maintains other elements of a deal the three sides agreed in October, including full debt repayment and a 7-year grace period, the source told Reuters.

1 comment:

MagsW said...

I see Daniel Hannen has re-surfaced! It won't be for long - have you noticed how the tories seem to slap him down ! And he'll be far too embarrassing as the election draws near. I also noticed the other evening on Newsnight that they put up Redwood - not Osborne ! Interesting.