Cable Viewer

Currently released so far... 12433 / 251,287

### Browse latest releases

2010/11 2010/12 2011/01 2011/02 2011/03 2011/04 2011/05
2010/11/28 2010/11/29 2010/11/30
2010/12/01 2010/12/02 2010/12/03 2010/12/04 2010/12/05 2010/12/06 2010/12/07 2010/12/08 2010/12/09 2010/12/10 2010/12/11 2010/12/12 2010/12/13 2010/12/14 2010/12/15 2010/12/16 2010/12/17 2010/12/18 2010/12/19 2010/12/20 2010/12/21 2010/12/22 2010/12/23 2010/12/24 2010/12/25 2010/12/26 2010/12/27 2010/12/28 2010/12/29 2010/12/30
2011/01/01 2011/01/02 2011/01/04 2011/01/05 2011/01/07 2011/01/09 2011/01/10 2011/01/11 2011/01/12 2011/01/13 2011/01/14 2011/01/15 2011/01/16 2011/01/17 2011/01/18 2011/01/19 2011/01/20 2011/01/21 2011/01/22 2011/01/23 2011/01/24 2011/01/25 2011/01/26 2011/01/27 2011/01/28 2011/01/29 2011/01/30 2011/01/31
2011/02/01 2011/02/02 2011/02/03 2011/02/04 2011/02/05 2011/02/06 2011/02/07 2011/02/08 2011/02/09 2011/02/10 2011/02/11 2011/02/12 2011/02/13 2011/02/14 2011/02/15 2011/02/16 2011/02/17 2011/02/18 2011/02/19 2011/02/20 2011/02/21 2011/02/22 2011/02/23 2011/02/24 2011/02/25 2011/02/26 2011/02/27 2011/02/28
2011/03/01 2011/03/02 2011/03/03 2011/03/04 2011/03/05 2011/03/06 2011/03/07 2011/03/08 2011/03/09 2011/03/10 2011/03/11 2011/03/13 2011/03/14 2011/03/15 2011/03/16 2011/03/17 2011/03/18 2011/03/19 2011/03/20 2011/03/21 2011/03/22 2011/03/23 2011/03/24 2011/03/25 2011/03/26 2011/03/27 2011/03/28 2011/03/29 2011/03/30 2011/03/31
2011/04/01 2011/04/02 2011/04/03 2011/04/04 2011/04/05 2011/04/06 2011/04/07 2011/04/08 2011/04/09 2011/04/10 2011/04/11 2011/04/12 2011/04/13 2011/04/14 2011/04/15 2011/04/16 2011/04/17 2011/04/18 2011/04/19 2011/04/20 2011/04/21 2011/04/22 2011/04/23 2011/04/24 2011/04/25 2011/04/26 2011/04/27 2011/04/28 2011/04/29 2011/04/30
2011/05/01 2011/05/02 2011/05/03 2011/05/04

### Browse by creation date

66 72 73 75 79 85 86 87 88 89 90 91 92 93 96 97 00 01 02 03 04 05 06 07 08 09 10
1966/12
1972/02 1972/08
1973/04
1975/03
1979/08
1985/03 1985/06
1986/05
1987/06
1988/01
1989/12
1990/01 1990/07 1990/08 1990/10
1991/05
1992/01 1992/06 1992/12
1993/10
1996/11
1997/12
2000/05 2000/06 2000/09 2000/11
2001/02 2001/03 2001/06 2001/07 2001/09 2001/10 2001/11
2002/01 2002/02 2002/03 2002/04 2002/07 2002/08 2002/09 2002/11
2003/01 2003/02 2003/03 2003/04 2003/05 2003/06 2003/07 2003/08 2003/09 2003/10 2003/11 2003/12
2004/01 2004/02 2004/03 2004/04 2004/05 2004/06 2004/07 2004/08 2004/09 2004/10 2004/11 2004/12
2005/01 2005/02 2005/03 2005/04 2005/05 2005/06 2005/07 2005/08 2005/09 2005/10 2005/11 2005/12
2006/01 2006/02 2006/03 2006/04 2006/05 2006/06 2006/07 2006/08 2006/09 2006/10 2006/11 2006/12
2007/01 2007/02 2007/03 2007/04 2007/05 2007/06 2007/07 2007/08 2007/09 2007/10 2007/11 2007/12
2008/01 2008/02 2008/03 2008/04 2008/05 2008/06 2008/07 2008/08 2008/09 2008/10 2008/11 2008/12
2009/01 2009/02 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12
2010/01 2010/02

### Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z
Embassy Athens Embassy Asuncion Embassy Astana Embassy Asmara Embassy Ashgabat Embassy Apia Embassy Ankara Embassy Amman Embassy Algiers Embassy Addis Ababa Embassy Accra Embassy Abuja Embassy Abu Dhabi Embassy Abidjan Consulate Auckland Consulate Amsterdam Consulate Adana American Institute Taiwan, Taipei
Embassy Bujumbura Embassy Buenos Aires Embassy Budapest Embassy Bucharest Embassy Brussels Embassy Bridgetown Embassy Bratislava Embassy Brasilia Embassy Bogota Embassy Bishkek Embassy Bern Embassy Berlin Embassy Belmopan Embassy Belgrade Embassy Beirut Embassy Beijing Embassy Banjul Embassy Bangkok Embassy Bandar Seri Begawan Embassy Bamako Embassy Baku Embassy Baghdad Consulate Barcelona
Embassy Copenhagen Embassy Conakry Embassy Colombo Embassy Chisinau Embassy Caracas Embassy Canberra Embassy Cairo Consulate Curacao Consulate Ciudad Juarez Consulate Chennai Consulate Casablanca Consulate Cape Town Consulate Calgary
Embassy Dushanbe Embassy Dublin Embassy Doha Embassy Djibouti Embassy Dili Embassy Dhaka Embassy Dar Es Salaam Embassy Damascus Embassy Dakar Consulate Dubai
Embassy Freetown
Embassy Guatemala Embassy Gaborone Consulate Guayaquil Consulate Guadalajara
Embassy Helsinki Embassy Harare Embassy Hanoi Consulate Ho Chi Minh City Consulate Hermosillo Consulate Hamilton Consulate Hamburg Consulate Halifax
Iran RPO Dubai Embassy Islamabad Consulate Istanbul
Embassy Jakarta Consulate Jerusalem Consulate Jeddah
Embassy Kyiv Embassy Kuwait Embassy Kuala Lumpur Embassy Kinshasa Embassy Kingston Embassy Kigali Embassy Khartoum Embassy Kathmandu Embassy Kampala Embassy Kabul Consulate Kolkata
Embassy Luxembourg Embassy Luanda Embassy London Embassy Ljubljana Embassy Lisbon Embassy Lima Embassy Lilongwe Embassy La Paz Consulate Lahore Consulate Lagos
Mission USOSCE Mission USNATO Mission UNESCO Embassy Muscat Embassy Moscow Embassy Montevideo Embassy Monrovia Embassy Minsk Embassy Mexico Embassy Mbabane Embassy Maputo Embassy Manila Embassy Manama Embassy Managua Embassy Malabo Embassy Madrid Consulate Munich Consulate Mumbai Consulate Montreal Consulate Monterrey Consulate Milan Consulate Melbourne
Embassy Nicosia Embassy New Delhi Embassy Ndjamena Embassy Nassau Embassy Nairobi Consulate Naples Consulate Naha
Embassy Ouagadougou Embassy Ottawa Embassy Oslo
Embassy Pristina Embassy Pretoria Embassy Prague Embassy Port Of Spain Embassy Port Louis Embassy Port Au Prince Embassy Phnom Penh Embassy Paris Embassy Paramaribo Embassy Panama Consulate Peshawar
Embassy Quito Consulate Quebec
REO Basrah Embassy Rome Embassy Riyadh Embassy Riga Embassy Reykjavik Embassy Rangoon Embassy Rabat Consulate Rio De Janeiro Consulate Recife
Secretary of State Embassy Suva Embassy Stockholm Embassy Sofia Embassy Skopje Embassy Singapore Embassy Seoul Embassy Sarajevo Embassy Santo Domingo Embassy Santiago Embassy Sanaa Embassy San Salvador Embassy San Jose Consulate Strasbourg Consulate St Petersburg Consulate Shenyang Consulate Shanghai Consulate Sao Paulo
Embassy Tunis Embassy Tripoli Embassy Tokyo Embassy The Hague Embassy Tel Aviv Embassy Tehran Embassy Tegucigalpa Embassy Tbilisi Embassy Tashkent Embassy Tallinn Consulate Toronto Consulate Tijuana
USUN New York USEU Brussels US Office Almaty US Mission Geneva US Interests Section Havana US Delegation, Secretary UNVIE Embassy Ulaanbaatar
Embassy Vilnius Embassy Vienna Embassy Vatican Embassy Valletta Consulate Vladivostok Consulate Vancouver
Embassy Windhoek Embassy Wellington Embassy Warsaw
Embassy Yerevan Embassy Yaounde
Embassy Zagreb

### Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
AORC AF AR ASEC AEMR AMGT AE ABLD AL AJ AU AO AFIN ASUP AUC APECO AM AG APER AGMT AMED ADCO AS AID AND AMBASSADOR ARM ABUD AODE AMG ASCH ARF ASEAN ADPM ACABQ AFFAIRS ATRN ASIG AA AC ACOA ANET APEC AQ AY ASEX ATFN AFU AER ALOW AZ APCS AVERY ASECKFRDCVISKIRFPHUMSMIGEG AN AGRICULTURE AMCHAMS AINF AGAO AIT AORL ACS AFSI AFSN ACBAQ AFGHANISTAN ADANA AX AECL AADP AMEX ACAO AORG ADM AGR AROC
BL BR BO BE BK BY BA BILAT BU BM BEXP BF BTIO BC BBSR BMGT BTIU BG BD BWC BH BIDEN BB BT BRUSSELS BP BX BN
CD CH CM CU CBW CS CVIS CF CIA CLINTON CASC CE CR CG CO CJAN CY CMGT CA CI CN CPAS CAN CDG CW CONDOLEEZZA CT CIC CIDA CSW CACM CB CODEL COUNTERTERRORISM CTR COUNTER CWC CONS CITEL CV CFED CBSA CITT CDC COM COE COUNTRY CLEARANCE CDB CKGR CACS CARSON CROS CAPC CHR CL CICTE CIS CNARC CJUS CEUDA CLMT CAC COPUOS CBC CBE CARICOM CTM CVR
DR DPRK DEPT DA DJ DEA DTRA DOMESTIC DHS DAO DCM DO DE DEAX DOE DK DS DISENGAGEMENT DOD DEFENSE
EAGR EAIR ECON ECPS ETRD EUN ENRG EINV EMIN EU EFIN EREL EG EPET ENGY ETTC EIND ECIN EAID ELAB EC EZ ENVR ELTN ELECTIONS ER EINT ES EWWT ENIV EAP EFIS ERD ENERG EAIDS ECUN EI EINVEFIN EN EUC EINVETC ENGR ET ETRDEINVECINPGOVCS ECONOMY EUMEM ESA EXTERNAL EINVECONSENVCSJA EINN EEPET ENVI EFTA ESENV ECINECONCS EPA ECONOMIC ETRA EIAR EUREM ETRC EXBS ELN ECA EK ECONEFIN ETC ETRDECONWTOCS EUNCH ECIP EINDETRD EUR ENNP EXIM ERNG EFINECONCS ETRDEINVTINTCS ETRO EDU ETRN EFIM EAIG EURN ECONCS ECONOMICS
FR FREEDOM FTA FI FOR FJ FTAA FARC FINANCE FDA FAC FBI FAO FM FMLN FO FISO FOREIGN FOI FAS FINR
GM GE GG GZ GOV GT GR GAERC GV GH GA GY GOI GTIP GCC GERARD GAZA GTMO GL GLOBAL GANGS GF
HO HA HILLARY HUMAN HR HURI HEBRON HU HK HUMOR HSTC HI HYMPSK
IS ICRC IN IR IZ IT INRB IAEA ICAO ITALY ITALIAN IRAQI IC IL ID IV IMO INMARSAT IQ IRAJ IO ICTY IPR IWC ILC INTELSAT IBRD IMF IRC IRS ILO ITU IDA IAHRC ICJ ITRA ISRAELI ITF IACI IDP ICTR IIP IA IF IZPREL IGAD INTERPOL INTERNAL ISRAEL ISLAMISTS INDO ITPHUM ITPGOV IBET IEFIN INR INRA INRO IEA
JA JAMES JO JM JOSEPH JP JOHNNIE JOHN JUS
KSCA KUNR KHLS KAWK KISL KPAO KSPR KGHG KPKO KDEM KNNP KN KS KPAL KACT KCRM KDRG KJUS KGIC KRAD KU KTFN KV KMDR KWBG KSUM KSEP KCOR KHIV KG KGCC KTIP KIRF KE KIPR KMCA KCIP KTIA KAWC KBCT KVPR KPLS KREL KCFE KOMC KFRD KWMN KTDB KPRP KMFO KZ KVIR KOCI KMPI KFLU KSTH KCRS KTBT KIRC KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KFLO KSTC KFSC KFTFN KIDE KOLY KMRS KICA KCGC KSAF KRVC KVRP KCOM KAID KTEX KICC KNSD KBIO KOMS KGIT KHDP KNEI KTRD KWNM KRIM KSEO KR KWAC KMIG KIFR KBTR KTER KDDG KPRV KPAK KO KRFD KHUM KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KREC KCFC KLIG KWMNCS KSEC KPIN KPOA KWWMN KX KCMR KPWR KCHG KRGY KSCI KNAR KFIN KBTS KPAONZ KNUC KNPP KDEMAF KNUP KNNPMNUC KERG KCRCM KWMM KPAI KHSA KTLA KRCM KCSY KSAC KID KOM KMOC KESS KDEV KJUST
LE LY LI LH LAB LU LG LOG LTTE LA LO LABOR LT
MARR MOPS MX MASS MNUC MCAP MO MU ML MA MTCRE MY MOPPS MASC MIL MR MTS MLS MILI MK MEPP MD MAR MP MTRE MCC MZ MDC MRCRE MV MI MEPN MAPP MEETINGS MAS MTCR MG MEPI MT MEDIA MASSMNUC MQADHAFI MPOS MAPS MARAD MC MIK MUCN MILITARY MERCOSUR MW
NZ NL NATO NO NI NU NATIONAL NG NP NPT NPG NS NA NSG NAFTA NC NH NE NSF NSSP NDP NORAD NK NEW NR NASA NT NIPP NAR NGO NW NV NATOPREL NPA NRR NSC NSFO NZUS
OTRA OVIP OEXC OIIP OSAC OPRC OVP OFFICIALS OAS OREP OPIC OSCE OECD OSCI OFDP OPDC OIC OFDA ODIP OBSP ON OCII OES OPCW OPAD OIE OHUM OCS OMIG OTR
PGOV PREL PARM PHUM PREF PTER PINS PK PINR PROP PBTS PKFK PL PE PSOE PEPR PM PAK POLITICS POL PHSA PPA PA PBIO PINT PF PFOR PHALANAGE PARTY PNAT POLINT PRAM PMAR PG PAO PROG PRELP PCUL PSEPC PGIV PO PREFA PALESTINIAN PGOVLO PGOVE PLN PINF PAS PDEM PHUMPGOV PNG PHUH PMIL POGOV PHUMPREL PHUS PRL PGOC PNR PGGV PROV PHUMBA PEL PECON POV PSA PREO PAHO PP PSI PINL PU PARMS PRGOV PAIGH POLITICAL PARTIES POSTS PTBS PORG PUNE POLICY PDOV PCI PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PBT PS PY PTERE PGOF
QA
RS RO RU RW REGION RIGHTS RSP ROBERT RP RICE REACTION RCMP RFE RM RIGHTSPOLMIL RF ROOD RUPREL RSO RELATIONS REPORT
SENV SZ SOCI SNAR SP SCUL SU SY SA SO SF SMIG SW STEINBERG SG SIPRS SR SI SPCE SN SYRIA SL SC SHI SNARIZ SIPDIS SPCVIS SH SOFA SK ST SEVN SYR SHUM SAN SNARCS SAARC SARS SEN SANC SCRS SENVKGHG SNARN SWE SSA
TPHY TW TS TU TX TRGY TIP TSPA TSPL TBIO TNGD TI TFIN TC TRSY TZ TINT TT TF TN TERRORISM TP TURKEY TD TH TBID TL TV TAGS TK TR THPY TO
UNGA UNSC UNCHR UK US UP UNEP UNMIK UN UAE UZ UG UNESCO UNHRC USTR UNHCR UY USOAS UNDC UNCHC UNO UNFICYP USEU UNDP UNODC UNCND UNAUS UNCHS UV USUN USNC UNIDROIT UNCSD UNICEF UE UNC USPS UNDESCO UNPUOS USAID UNVIE
VE VT VZ VTPREL VM VN VTIZ VAT VC VTEG VI
WMO WTRQ WB WI WWARD WA WBG WITH WHA WTO WMD WTRO WIPO WHO WS WHTI WEU WZ WFP
XB XG XT XH XA XM XF XE XR XK XL XW XY XS XX XV XD XTAG XQ XU XZ XC XI
YM YE YI YMCS
ZI ZP ZR ZO ZF ZANU ZOELLICK ZU ZL ZEALAND ZN ZB ZA ZK ZJ

### Browse by classification

CONFIDENTIAL CONFIDENTIAL//NOFORN SECRET SECRET//NOFORN UNCLASSIFIED UNCLASSIFIED//FOR OFFICIAL USE ONLY

### Community resources

Follow us on Twitter Check our Reddit Twitter this Digg this page Contact us on IRC

courage is contagious

### Viewing cable 09REYKJAVIK101, Iceland: Tough Times Ahead: Minister of Finance Paints

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:

- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09REYKJAVIK101.

Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09REYKJAVIK101 | 2009-06-05 17:05 | 2011-01-13 05:05 | CONFIDENTIAL | Embassy Reykjavik

`

    VZCZCXRO1950
    PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
    DE RUEHRK #0101/01 1561711
    ZNY CCCCC ZZH
    P 051711Z JUN 09
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 4084
    INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
    RUEHZL/EUROPEAN POLITICAL COLLECTIVE
    RUEAIIA/CIA WASHDC

` `

    C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000101

    SIPDIS

    E.O. 12958: DECL: 06/04/2019
    TAGS: EFIN ECON PREL IC
    SUBJECT: Iceland: Tough Times Ahead: Minister of Finance Paints
    Somber Picture

    Classified By: CDA Neil Klopfenstein for reasons 1.4 (b) and (d).

    ¶1.  (C) Summary: Iceland Minister of Finance Steingrimur J. Sigfusson
    predicted difficult times for Iceland in the year ahead at a June 3
    meeting with the CDA. Sigfusson promised significant tax hikes and
    budget cuts, with much of the pain to come in the fall. Negotiations
    with labor and capital to map out a consensual road ahead have been
    unusually calm and understanding, particularly with often contentious
    government unions. He noted that agreements on loans from the Nordic
    countries and Poland are nearly finalized, but that promised support
    from Russia is not nailed down. Sigfusson was confident that a
    mid-July review by the IMF would go well. The Minister noted the
    government's delicate balancing act regarding interest rate levels.
    He said that the "bleeding" Icelandic business sector and
    considerable public clamor to relieve the debt burden of Icelandic
    consumers argue for lowering rates. On the other hand, he is well
    aware of the IMF's concerns that quick and drastic reductions in
    rates could erode efforts to stabilize the kronur. Sigfusson confided
    that talks are underway again to resolve the Icesave accounts issue.
    He said the "UK is sending mixed messages," while talks with the
    Dutch are going better. Although not a supporter of joining the EU
    himself, Sigfusson believes the Parliament will agree to begin
    membership negotiations in the next few weeks. He believes that vote
    will be close, and that a "no" vote would bring down the current
    government.  End Summary

    ¶2.  (C) On June 3, at the Embassy's first meeting with Minister of
    Finance Steingrimur Sigfusson since Iceland's April 25th elections,
    the Minister described the government's May 28th sin tax hikes on
    alcohol, tobacco, and gasoline as "the first of many cold showers."
    He said the taxes were raised without notice because of rumors that
    such an action was imminent and because it was a necessary measure
    that the government could take in the middle of the financial year
    without Parliamentary approval.  Sigfusson said more unpopular
    announcements will come in the next week and that there will be a
    huge effort to raise revenues and cut expenditures before the start
    of the next fiscal year. These plans will be debated in the next
    Parliament, which opens in October.

    ¶3.  (C) The government is trying to build a consensus for drastic
    actions by negotiating with key social partners (business, government
    unions, and private sector unions and associations).  Sigfusson said
    these discussions have proceeded with unusual calm and understanding.
     He noted that this was particularly the case with the government
    employee unions, which have been traditionally contentious
    negotiators.  The unions are intent on saving jobs and are willing to
    forego wage increases for two years to do so. The Minister said that
    some private sector unions, particularly outside of Reykjavik, have
    been reluctant to compromise on wage increases.

    ¶4.  (C) Minister Sigfusson was upbeat about the IMF loan package.  He
    said he expected a mid-July IMF review, which he thought would go
    well.  Sigfusson shared that all was on track with the loans from the
    Nordic countries, which he suggested would be finalized soon.  He was
    delighted that the Poles were likely to provide the full $250 million
    that they had pledged last fall.  They will be given a copy of the
    Nordic paper work as a model("with the interest rate whited out").
    The Russian commitment of $500 million is less certain, but
    negotiations continue. A meeting with a high level Russian Treasury
    official is scheduled soon.  Sigfusson admitted that if the Russian
    funds fall through, Iceland will be facing a gaping hole in their
    package. If this happens, he indicated they would go knocking on
    other doors, including Canada, the United States, other European
    countries, and perhaps China.

    ¶5.  (C) The CDA raised U.S. Treasury Department concerns about the
    Iceland Central Bank's recent steep interest rate cuts.  Sigfusson
    noted that the government is feeling real political heat to lower
    rates.  He said, "The business community is bleeding." Lower rates
    are particularly important to revive the profitability of the banking
    sector, he said, which needs to reduce the gap between what they pay
    depositors and what they earn on their foreign loans.  Sigfusson is
    very aware of the capital flight risks of lower rates, but feels that
    current controls to keep capital in the country are working
    effectively.  The Minister said that he thought the risk posed by
    lower rates was worth it to preserve suffering Icelandic businesses
    (and the jobs they provide). He said that in the end that neither
    side would be happy.  (Comment:  The Central Bank announced a rate
    cut of 1 percent on Thursday, well below the 6% cut that some
    advocated). When asked about whether the government was exerting more
    control over the Central Bank, Sigfusson said that they have no real
    influence, but do exchange a lot of information.

    ¶6.  (C) Regarding the Icesave negotiations, Sigfusson confided that
    "secret" talks are underway.  He said, "We will announce the talks if
    progress is made." (Comment: A local daily carried a story on the
    talks in today's paper.) Sigfusson reiterated that the Government of
    Iceland will live up to its obligation to reimburse Icesave
    depositors for their losses, as required by EU regulations.  However,
    he said the reimbursement scheme considered by the previous

    REYKJAVIK 00000101  002 OF 002

    government last year (in which Iceland would take loans from the U.K.
    and Holland for the full amount of the deposit guarantees it owes)
    was not tenable. In its place, the government envisions a new payback
    plan: the assets of the banks would be liquidated over the next
    several years (Sigfusson said it could take up to seven years) and
    the returns from the assets would be turned over to the UK and Dutch
    governments to pay back Iceland's debt.  Sigfusson estimated that
    these assets could cover up to 75% of the Iceland government's debt
    to the U.K. and the Netherlands. The remaining debt would be paid
    back by a loan with terms to be determined after the final obligation
    is known.  The advantage of this plan, according to Sigfusson, is
    that Iceland would not be saddled with a huge loan on its books,
    which would affect the country's financial ratings.

    ¶7.  (C) Sigfusson admitted that the Netherlands is more open to this
    plan than are the British.  He said the Dutch understand that there
    were faults with the EFTA deposit insurance system and are
    sympathetic to the hard situation in Iceland.  On the other hand,
    Sigfusson stated, "The UK government is sending mixed messages, and
    have delayed a few meetings." He speculated that local British
    politics, as well as the instigation of Anti-Terrorism legislation
    and the loss of charity organization deposits, also contribute to
    British reluctance to endorse the plan.

    ¶8.  (C) Sigfusson is clearly aware that the Icesave negotiations will
    not likely be resolved before the anticipated IMF review in July.  In
    discussions with IMF representative Mark Flanagan last week, the
    Minister asked Flanagan if Iceland could proceed with the review if
    everything else was in order except an agreement with the British.
    Flanagan said Iceland had a right to ask for the review to proceed.
    Sigfusson indicated that Iceland would ask other IMF Executive
    Committee board members to prevent a UK block of the review, should
    the British seek to stop it.

    ¶9.  (C) The Minister predicts that the Parliament will approve a
    resolution to begin negotiations to join the European Union before
    its summer recess. The vote will be close, as some of the opposition
    parties are milking the decision for political gain.  He says the
    Social Democratic Alliance (SDA) Party has much riding on this vote,
    and that should it fail, the SDA/Left-Green coalition government
    would likely fall. Sigfusson, himself skeptical of EU membership,
    fears that many, especially in the SDA, see the EU as a panacea for
    all of Iceland's ills. He says, "Our priority should be fixing things
    here and now.  The benefits of EU membership are at least a decade
    away."

    ¶10.  (C) Comment:  To the surprise of some, Sigfusson is proving to
    be a serious and responsible Minister of Finance.  Although many in
    his Left-Green Party have been suspicious of the IMF loan from the
    start, the Minister has acknowledged to Emboffs on several occasions
    the importance of the IMF package and his commitment to ensure its
    success.  Sigfusson has resisted (probably while gritting his teeth)
    most temptations to outright blame the current crisis on the excesses
    of capitalism. He does not hesitate, however, to take an occasional
    swipe at the rightist opposition and remind voters that Iceland's
    present economic mess is not of his doing. We are somewhat skeptical
    of the Minister's read out on the status of the Icesave negotiations.
     The British Ambassador painted a much bleaker picture in
    conversations with Emboffs a fortnight ago, saying the Icelanders
    have not been serious about addressing the issue, and that they were
    offering up naive "hair-brained" schemes of little substance to pay
    back the British loans.

    KLOPFENSTEIN

`