First up--Hudson provides a thumbnail sketch on what happens when you listen to neoliberals--especially the kind that come from the banking business.
Will Iceland Vote No or Commit Financial Suicide
Showdown in Iceland
By MICHAEL HUDSON April 8 - 10, 2011
A landmark fight is occurring this Saturday, April 9. Icelanders will vote on whether to subject their economy to decades of poverty, bankruptcy and emigration of their work force. At least, that is the program supported by the existing Social Democratic-Green coalition government in urging a “Yes” vote on the Icesave bailout. Their financial surrender policy endorses the European Central Bank’s lobbying for the neoliberal deregulation that led to the real estate bubble and debt leveraging, as if it were a success story rather than the road to national debt peonage. The reality was an enormous banking fraud, an orgy of insider dealing as bank managers lent the money to themselves, leaving an empty shell – and then saying that this was all how “free markets” operate. Running into debt was commended as the way to get rich. But the price to Iceland was for housing prices to plunge 70 per cent (in a country where mortgage debtors are personally liable for their negative equity), a falling GDP, rising unemployment, defaults and foreclosures.
To put Saturday’s vote in perspective, it is helpful to see what has occurred in the past year along remarkably similar lines throughout Europe. For starters, the year has seen a new acronym: PIIGS, for Portugal, Ireland, Italy, Greece and Spain.
The eruption started in Greece. One legacy of the colonels’ regime was tax evasion by the rich. This led to budget deficits, and Wall Street banks helped the government conceal its public debt in “free enterprise” junk accounting. German and French creditors then made a fortune jacking up the interest rate that Greece had to pay for its increasing credit risk.
Greece was told to make up the tax shortfall by taxing labor and charging more for public services. This increases the cost of living and doing business, making the economy less competitive. That is the textbook neoliberal response: to turn the economy into a giant set of tollbooths. The idea is to slash government employment, lowering public-sector salaries to lead private-sector wages downward, while sharply cutting back social services and raising the cost of living with tollbooth charges on highways and other basic infrastructure.
The Baltic Tigers had led the way, and should have stood as a warning to the rest of Europe. Latvia set a record in 2008-09 by obeying EU Economics and Currency Commissioner Joaquin Almunia’s dictates and slashing its GDP by over 25 per cent and public-sector wages by 30 per cent. Latvia will not recover even its 2007 pre-crisis GDP peak until 2016 – an entire lost decade spent in financial penance for believing neoliberal promises that its real estate bubble was a success story. moreSo here are the threats being issued this morning in response to the NO vote in Iceland. (Note that the government trying to sell out the Icelandic people is a coalition of Social Democrats and Greens. The folks who taught us that political Left and Right makes damn little difference when both are members of the Leisure Classes have another shining example to hold up these days.)
Iceland rejects debt deal to repay UK, Dutch
REYKJAVIK, Iceland (AP) — Voters in Iceland have rejected a government-approved deal to repay Britain and the Netherlands $5 billion for their citizens' deposits in the failed online bank Icesave, referendum results showed Sunday.
With about 90 percent of the votes counted, the "no" side had 59.1 percent of the votes and the "yes" side 40.9 percent.
The result reflects Icelanders' anger at having to pay for the excesses of their bankers, and complicates the country's recovery from its 2008 economic collapse.
Prime Minister Johanna Sigurdardottir said the results were disappointing but she would try to prevent political and economic chaos ensuing. She said the repayment dispute would now be settled by a European trade court — which could impose harsher terms on Iceland than those rejected in Saturday's vote.
Britain and the Netherlands said they would fight to get their money back.
Dutch finance minister Jan Kees de Jager said the referendum result "is not good for Iceland and also not good for the Netherlands."
"The time for negotiations has passed," he said. "Iceland still has the obligation to pay us back. This is now a case for the courts."
British Treasury minister Danny Alexander said he was disappointed "the people of Iceland have rejected what was a negotiated settlement."
Alexander told the BBC that "we have an obligation to get that money back, and we will continue to pursue that until we do." more