A Debt Moratorium for Iceland

The English-Dutch Diktat embodied in the Icesave agreement must be rejected as a matter of Icelandic national survival and paramount sovereign self-defense. Iceland cannot negotiate under British threats and accusations of terrorism. Any Icelandic offers made so far have been extorted under blackmail and duress, and are null and void. No half-measures like the proposal to pay 6% of future GDP growth can be acceptable; similar measures led to hyperinflation and dictatorship in Peru after 1985-90, and they will work no better here. Any attempt to pay the Icesave extortion means depopulation, the demolition of health and education, the degradation of the labor force, the strangling of productive investment, and irreversible national decline. The Icesave money cannot be paid in any case – payment is a physical impossibility. Instead of sending money abroad, Iceland should launch a program of economic recovery and full employment to fight the world economic depression now radiating out from the US and UK:

1. Declare an immediate unilateral sovereign debt moratorium to freeze payments of interest and principal on all financial debt to the United Kingdom and the Netherlands, to remain in force for a minimum of five years or for the duration of the world economic crisis, whichever lasts longer in the judgment of the Icelandic government. The goal of any future negotiations must be to extinguish the Anglo-Dutch claims, which have no basis in law. Get the IMF out of Icelandic affairs by any means available. The European Union has shown itself to be hostile to Iceland in this critical matter and EU membership would therefore be counter-productive.

2. Take measures to control financial speculation, starting with a 1% Tobin tax on all financial transactions and turnover, including derivatives, options, futures, indices, stocks, bonds, currency trades, and commodities speculation. Stop foreclosures on primary residences, farms, and businesses for the duration of the crisis. Re-regulate banking and financial markets. Maintain exchange controls.

3. Place the Icelandic central bank under the direct control of the elected government. Money supply, interest rates, and approved categories of lending must be set by public laws passed openly, and not by unelected and unaccountable bankers, Start a recovery policy of 0% long-term Icelandic national bank lending to local governments and the private sector for infrastructure and for production. Production means farming, fisheries, forestry, construction, mining, manufacturing, energy production, scientific research, and any business of any size that produces a tangible physical product – not hot money, financial services or speculation.

4. Using this 0% credit, promote national infrastructure to create new well-paid hi-tech jobs, increase the productivity of labor, and expand Iceland’s stock of modern capital goods. For electricity, quickly finish the publicly owned Hellisheidi geothermal plant to the full planned 300 megawatts. For transportation, build electric fast rail from Reykjavik to Keflavik airport, from Reykjavik to Borgarnes, and from Reykjavik to Selfoss, thus reducing auto traffic, carbon emissions, and the need for imported oil. Build the Highlands superhighway complete with fast rail link to Egilsstadir, with a northern road-rail branch to Akureyri. Expand the international airports at Akureyri and Egilsstadir to increase fish exports. These projects will bring visible progress and modernization into the lives of most Icelanders, and provide a powerful stimulus to the real economy.

5. Develop a strategy for high-value-added exports in the coming decades, and coordinate all government policies to ensure the success of these exports, so as to earn the necessary foreign exchange. Engineers working for the Orkuveita Reykjavikur are now the world leaders in super-critical geothermal energy technology, which can multiply existing geothermal potentials by 500 to 1,000%. Mobilize all resources to perfect and market this technology worldwide. Government policy should be to promote exports in which Iceland can be the world leader, with special attention to aerospace, high energy physics, biomedical research, and computer technology.

For more information, contact Thorarin Einarsson in Reykjavik at (354) 534-8607 or thorhaki@hotmail.com.

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