Cablegate: Icelandic Economic Crisis: Bankers Argue Goi Needs To
OO RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHRK #0228 2841814
ZNY CCCCC ZZH
O 101814Z OCT 08
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3839
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
C O N F I D E N T I A L REYKJAVIK 000228
E.O. 12958: DECL: 10/07/2018
TAGS: EFIN ECON PGOV IC
SUBJECT: ICELANDIC ECONOMIC CRISIS: BANKERS ARGUE GOI NEEDS TO
SWALLOW PRIDE, IMF IS ONLY WAY OUT
REF: Reykjavik 227
Classified By: DCM Neil Klopfenstein for reasons 1.4 (b) and (d).
1.(C) Two Icelandic bankers met with Econoff today to emphasize that
the Icelandic authorities have chosen the wrong path out of this
crisis and appealed for Washington to provide guidance to the GOI.
The bankers shared a graph that showed of the 11 billion euro
Landsbanki debt, 31 percent belonged to the U.S. and Canada. They
emphasized that Landsbanki had the smallest foreign debt of the three
banks in Iceland and that American investors will lose billions.
They outlined a plan emphasizing the importance of bringing the
creditors to the table, getting the IMF involved and finding a
resolution through a multilateral approach. They stressed the need
for the U.S. to become involved both to encourage the Icelandic
authorities to "be rational and swallow their pride" and for the U.S.
to build consensus within the IMF to allow Iceland access to the
supplemental reserve facility such as Korea, Turkey and Russia have
used in the past. They believe that the IMF stamp of approval will
help bring creditors to the table and what is needed the most is a
coordinated multilateral approach.
2.(C) Today's media showed an increasing chorus of calls for Iceland
to come to terms with the IMF as the only way out of disaster.
Embassy contacts in the business community this afternoon echoed this
sentiment. We are told that Central Bank director David Oddson is
fighting any move to come to terms with the IMF, but our sampling
suggests that more people are coming to the reluctant conclusion that
Iceland will have to bite this bullet. The Prime Minister was
repeatedly asked about a deal with the IMF at today's press
conference. He brushed off suggestions that a deal had been made but
stressed that the GOI is talking to the IMF in Reykjavik and in