Iceland won
After a long drawn-out political and legal debacle the EFTA court today ruled against the UK and the Netherlands governments and in favour of the Icelandic government in the so-called Icesave case.
The ruling is somewhat surprising, as legal experts in general had expected Iceland to lose the case.
The ruling potentially has implication for cross-border banking across the EU and therefore one should watch out for the reaction from the EU to this ruling.
Icelandic recovery set to continue
Overall the ruling today is very good news for the Icelandic economy. First, because the Icelandic government will not have to pay a considerable amount of money to the UK and Dutch governments (potentially more than 20% of GDP). Second, this removes considerable uncertainty regarding public finances in Iceland and uncertainty about the outlook for the Icelandic economy and markets in general.
We have for sometime been positive on the outlook for the Icelandic economy and there is no doubt that today’s ruling will help support the recovery, particularly because it removes considerable uncertainty.
As a result, we would expect today’s ruling to give a considerable boost to Icelandic consumer and business confidence.
Finally, today’s ruling should also help speed up the process of reliberalising the Icelandic financial markets and getting rid of the draconian currency controls. We continue to expect GDP growth around 2.0-2.5% in 2013 and 2014.
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