Not only for individual savers, but also for numerous provincial and municipal governments and other (semi) public institutions. Huge amounts of taxpayers' money were deposited in Icelandic banks and the latest figures put the losses at 236.5 million euros.
It is doubtful whether any of that money will be returned. Iceland is almost bankrupt; Reykjavik officially requested funding from the International Monetary Fund on 13 October; the country's banking system has collapsed and the nation's three largest banks have been taken over by the government. On Wednesday, Iceland's central bank (Sedlabanki) cut its key interest rate by 3.5% in an attempt to prevent national bankruptcy. Despite the cut, Sedlabanki announced, "a severe economic contraction was unavoidable".
None of this bodes well for Dutch public institutions and regional governments. Private investors will get their money back; Finance Minister Wouter Bos announced earlier that private losses, estimated at between 1.6 and 1.7 billion euros - would be covered by the Icelandic government and other banks. However, Reykjavik has to borrow its contribution of approximately 1.1 billion euros from The Hague.
There's a great deal of anger in the Netherlands about the failure of the Dutch central bank (DNB) to warn of possible problems at Icelandic financial institutions.
On Wednesday, a spokesperson for the Dutch finance ministry said the DNB had been on the verge of intervening at Icesave, an Icelandic internet bank offering extremely competitive interest rates, but regulations and legal constraints prevented any action.
The spokesperson added that an announcement by the DNB would probably have created a run on Icesave and accelerated its downfall.
Misinformed
However, a tiny glimmer of hope has flared on the horizon. On Wednesday, the Dutch finance minister said the DNB may have been misinformed about the credit-worthiness of Icelandic banks by that country's financial services authority: "the Icelandic authorities told the Dutch central bank that everything was fine until the very end". Minister Bos added, "we could end up in court over this".
Euro prisoner of ice
Even if it does end up in court, it could take years before Iceland is in a position to pay back Dutch provincial and municipal governments. The money invested in Icelandic banks was, of course, earmarked to fund various plans and projects across the Netherlands, and the losses may jeopardise them. The costs are still being counted and the effects will probably be felt for many years to come.
Jacqueline Carver
Radio Netherlands
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The global credit crisis and the subsequent failure of Icelandic banks have had serious consequences in the Netherlands
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