After 2 referendums in Iceland which both rejected a plan to repay the Netherlands and UK between 2016 and 2045, this ruling from the highest court in Iceland means that Reykjavik is now legally bound to repay both countries under the teams which it rather than the Icelandic people see fit.

Iceland’s main banks collapsed at the height of the financial crisis 3 years ago, which meant that 300,000 British savers with one of those banks – Icesave- couldn’t access their deposits. The UK Treasury refunded them in full and the government in Reykjavik agreed to repay that £2.4bn with interest.

That refund did not cover dozens of British local authorities which had saved with Icesave because they were considered to be educated investors rather than depositors.

Today’s Icelandic Supreme court ruling sets out that Depositors (including councils’ money) have “priority creditor status” for the deposits they had in failed Icelandic banks.

There is a Private Members Bill winding its way through parliament at the moment which goes to committee next month and must be agreed upon before April 2012 to avoid being guillotined. The Govt is now formally supporting the Bill.

Assuming it passes all these hurdles, the Govt would then commission a review and that might determine when or even whether there should be jump onto CET – possibly by 2013.

The Review though will consult all the devolved UK parliaments and assemblies and there is nothing to suggest that Scotland would change its tune. In fact Edinburgh said as recently as last March that the SNP administration was against it because of the increased risk to Scottish children travelling to school in the dark.

Furthermore the UK govt has said that ‘consensus’ was needed for a change but what it really meant was unanimity because as a spokesman for BIS told me “if there is any disagreement then it wont happen”.

This begs the question: Why would the UK govt back a plan which it knows in its heart will fail due to an effective Scottish veto?

The answer seems to lie (according to my BBC Millbank colleagues) in the right wing of the Tory party whose MPs predominantly like the idea of brighter evenings in Winter. So, in order to placate them after the Commons Euro referendum vote on Monday, the Govt will throw them a bone to chew on, which ironically would bring Britain that bit closer to Europe i.e. in the same time zone.

PS: For those of you who cant get enough of this story, I’ve attached my TV piece on it from 12 months ago

http://www.bbc.co.uk/news/uk-11659956

The so-called Anglo Saxon nations of the UK and US have a very high Gini. In the US alone, the top 1% of the population owns 23.5% of that country’s income.

This is at the heart of the #Occupy movement.

And governments – whether democratic or otherwise – should not ignore this movement because it could be the start of a gamechanger.

That’s because these Occupy movements aren’t the usual collection of hippies, communists and conscientious objectors – though they are well represented here as well. They are mostly populated by young educated middle class men and women. People who are seriously worried that they have no future and no way of creating a future for themselves.

50% of 18-24 year olds in Spain have no job. One million young people in Britain are unemployed and finding it very tough to get on a career ladder.

These people are the voters and leaders of the future and they cant even get unpaid internships because the sons and daughters of the elite have those slots mopped up.

They are experiencing something their parents never did.  They have forgone early income streams in order to get an education and when they come out the other side burdened with massive university debts, they either cant get a job or the job they get pays no better than the guy who left school at 17.

This is why the Labour leader Ed Miliband (who has otherwise been  uninspiring) knew exactly what he was saying when spoke of the ‘squeezed middle’.

Why would you bother getting a 3rd level education if you dont earn considerably more than the person without a degree?

This is frightening politicians who know that the middle classes drive every economy and decide every election.  If they see their young adults out of work with good degrees and nowhere to emigrate to, that bodes ill for society as a whole.

And it’s getting worse. Even if you have a nice white collar job like an accountant or solicitor, you face the very real prospect of being priced out of the market by your equivalent in India.  Companies, which outsourced blue collar jobs such as manufacturing are now targeting the professions.

That doesnt make companies nor capitalism evil. It’s just a natural yet unexpected by product of the same globalisation which has lifted hundreds of millions out of abject poverty.

And so the cost-cutting and austerity which is a by-product of the banking crisis – caused by the 1% – has spawned a new very mobile and very switched on protest movement on behalf of the 99% .

Theirs is the earth and all that’s in it. Yet for the first time they (the young middle class) are poorer in real terms than the generation before them.

How long will it be before the well heeled start rioting on the streets of London, Manchester, Boston or New York ie the countries with high Gini Co-efficients?

It’s a measure of just how weak the Group of the richest industrialised nations (G7) is that Britain with its paltry 0.2% growth, can proudly say that it’s on the podium for growth among its peers. That the gold medal would go to all but bankrupt Italy and that Germany and Japan are amongst the weakest, shows that the global economy is in a very strange place.

GDP growth Q2   Q1
UK               0.2% 0.5%
Canada      -0.1% 0.9%
Germany    0.1% 1.3%
France        0.0% 0.9%
USA            0.3%*** (1.3% annualised)
Japan        -0.5% -0.9%
Italy           0.3% 0.1%

***The figure for the USA is difficult because they only publish an annualised figure and simply dividing by 4 is not accurate for a quarterly figure

source:

http://www.tradingeconomics.com/united-kingdom/gdp-growth

On Friday European Finance ministers postponed a decision to pay Greece the next €8bn installment from the first EU/IMF bailout until such time as they had seen firm evidence that Greece was slashing its debts.

Now in an apparent email to the Greek government and published by an Athens newspaper, the Troika of EU, ECB and IMF lists 15 measures to be implemented.

They include making 100,000 civil servants redundant by 2014 and starting tomorrow. Pensions and overtime payments are also to be cut, TV stations closed, heating oil taxes raised and privatisations sped up.

The measures could divide the Greek government which is discussing the issue this weekend. Greece already has over 16% unemployment and a rapidly shrinking economy. It’s feared that the severe measures demanded by the Troika could increase the number of protesters on the streets and make default more rather than less likely.

15 Measures

http://translate.google.it/translate?hl=it&sl=auto&tl=en&u=http%3A%2F%2Fwww.tovima.gr%2Ffinance%2Farticle%2F%3Faid%3D420323

1

Issuance of ministerial decisions to cut contracts without a fixed term and in all institutions of government (including teachers, to meet the objectives of the Medium Term Plan).

2

Issue presidential decree / ministerial decisions on the implementation of employment mode, extending the measure to all public bodies and immediate written notice of officials in introducing a system backup.

3

Issuance of ministerial decisions for equalizing the tax on heating oil and fuel.

4

Be regulated by the retention as a means for collecting the solidarity surcharge.

5

Cuts in pensions for beneficiaries of NAT and OTE.

6

Crop subsidies at the post office for handling the press and issue a ministerial decision to legislate directly.

7

New legislative framework for the pay status to the State, with cuts in allowances and overtime.

8

Freeze basic and supplementary pensions by 2015.

9

Redefinition of the arbitrary fines and immediate adoption of the new Master.

10

Issuance of ministerial decisions to close / merge 35 agencies described in the Term and closing an additional 30.

11

Issuance of ministerial decisions to close / merge: CGC, RTD, ODDY, National Youth Agency, EOMECH, IGME, OSB, DEPANOM, Themis, ERT.

12

Issuance of ministerial decisions on registration of immovable and movable property …. passing under the control of the state.

13

Issuance of ministerial decisions on a) the determination of all social benefits and health benefits, b) signing of collective agreements (16) private hospitals and health centers c) signing of contracts between hospitals of the NHS and private hospitals for the leasing of beds.

14

New law to reduce the pensions of OGA

15

Legislation to establish reductions in drug prices and signing contracts with pharmaceutical companies for immediate application / Introduce ‘insurance’ money for pharmaceutical companies.

My thoughts on this – live reaction on BBC News

The G7 group of rich industrialised countries -plus Russia – said it would provide a programme of support to Morocco, Jordan, Egypt and Tunisia. Although Libya wasn’t formally added to that list, its representatives attended today’s meeting in Marseille.

The countries were told that a pool of $38bn in aid would be made available to countries in the southern and eastern Mediterranean aid recobnstruction and the move towards democracy. It’s understood that sum would be funded by multi-national bodies such as the IMF, World Bank and the European Bank for Reconstruction and Development.

The Chancellor George Osborne said he saw the EBRD playing a similar role in the Middle East as it played in eastern Europe after the fall of communism in the early 1990s.

It looks like we’re back there once again. A lot of the traders who I speak to are very pessimistic. But the difference between them and you or I is that their gloominess has a very real impact on millions of lives as they dump shares for fear of being left holding a valueless asset. A keystroke in a trading room in Canary Wharf can lead tsunami-like to companies on the other side of the world sacking thousands of employees, governments slashing spending or raising taxes and retirement savings for you and me all but evaporating.

Why are they selling? Well like confused teenagers, they are yearning for some sort of leadership to take control of the crisis on either side of the Atlantic.

In Europe, squabbling and procrastination has meant that the Eurozone’s very existence is up for grabs – with all the nasty consequences that entails for all of us. Traders want someone – ideally Angela Merkel -to put her foot on the proverbial ball and make some hard decisions before the single currency becomes an ex currency.

Stateside, it seems as if President Obama’s hands are tied behind his back by his Republican opponents as he tries to get America growing again while cutting its enormous deficit simultaneously

Where will this end?

I fear it wont end soon. Not as long as Europe and America remain open democracies – necessitating the regular blessing of electorates. And unlike 3 years ago when Governments bailed out banks, this time neither banks nor governments have any money.

Which means we all need to hope that this spasm of market fear passes and sensible future-proofed decisions are taken – and soon.

This – alas – is the glass three quarters full scenario.

The real danger is that we have just started a decade of anaemic growth which will relegate Britain, America and the Eurozone to mere spectators as China, Brazil and India take over the reigns of economic power while our standards of living flat-line at best.

For reference purposes, the Index top spot or least corrupt country in the world, usually goes to Canada, New Zealand or a Scandinavian country with Denmark number One as we speak.

Last year Britain came 20th in the world but as recently as 2006, it was 12th.

I’ve spoken to the UK head of TI and he told me that the recent phone hacking and police corruption scandal would almost certainly have a negative impact on Britain’s rating when the next Index is published in November.

This matters since Multi National Corporations (MNCs) look at a whole host of factors before they decide where to open (or close) a factory or investment hub. They look at the obvious stuff such as talent pool, tax rates, transport links, wage costs etc etc. But these highly mobile MNCs also look at esoteric and intangible stuff such as quality of life and the degree of corruption.

If an MNC sees that British police like a quick backhander every now and then or company executives might have their private conversations listened to by nefarious and (hither to) politically unaccountable newspapers, they may just think twice before they park their billions in Blighty.

If Britain was to drop 20 places in the next TI index, it would in theory be more corrupt than Bhutan, Botswana and Mauritius. 19 European countries would stand above it!

This means that UK Inc could suffer in Pound, Euro and Dollar terms when it’s trying to get its record deficit down to a manageable level by encouraging people to invest there.

Here’s the latest survey: http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

Nick Clegg said that “the gravity of the growing sovereign debt crisis in America and the Eurozone was immensely serious” and that “people in the UK were mistaken to ignore the issues which could affect millions of people in Britain.”

The deputy Prime minister was speaking ahead of a conference call of Eurozone finance ministers this evening and an emergency summit on Thursday at which the escalating crisis will be discussed.

Last week, the cost of borrowing for Europe’s 4th largest economy, Italy, soared to the kind of levels which forced Greece, Portugal and Ireland into EU and IMF bailouts.

The remaining European Union bailout fund is roughly a third the size of Italy’s £1.4trillion debt mountain.

Many observers believe that some sort of sovereign default is unavoidable.