ON SATURDAY the Icelandic government unveiled a mortgage debt relief programme worth about 150 billion krona (€913.5 million), financed by a tax hike on financial institutions and a haircut on debts owed to overseas investors in Iceland’s failed banks.
“The plan will assist over 100,000 households,” Prime Minister Sigmundur Gunnlaugsson said. “This will be the beginning of an economic renaissance.”
According to Reuters, the debt relief will apply to some ISK1.36 trillion (€8.3 billion) in mortgages linked to inflation, with a maximum limit of ISK4 million (€24,360) per household and totalling around ISK80 billion (€487 million) over the four-year period of the programme.
Mortgage holders will also be given tax breaks to encourage them to use pension savings to pay down their borrowing, a measure worth about ISK70 billion (€426 million).
The government said it would finance the measure through tax hikes on financial institutions and a haircut on around $4 billion (€2.9 billion) in debts owed to overseas investors in Iceland’s failed banks, which collapsed in late 2008.
Those debts are now mainly held by hedge funds, which bought them at a deep discount.
“The net impact on the Treasury is expected to be insignificant each year during the period 2014-2017,” the government said.
The Central Bank of Cyprus has given notice that there could be a haircut on non-performing loans. Perhaps a household debt relief programme similar to that announced by Iceland will follow?
No! Cyprus and Greece are just waiting to get all the bailout money they can lay their hands on and then default on their loans and leave the eurozone, but not the EU. They will then wait for the European Economic Community, aka 1973, to come along after the May 2014 elections when we can all trade freely and get along with each other without all the red tape.
Not a good idea to raid pension funds in order to give mortgage relief!
Also ‘haircut to overseas investors’; well BoC have already done that; I do hope they don’t think they can do it again.
Why are they still going down the same old route. If they sorted out the title deeds situation and the developer loans plus the tax the developer owes instead of trying to squeeze it out of the home owner then people might pay their mortgage. This latest proposal only benefits the banks. Once the mortgage has been paid they will not care about the rest of the problems