Currently released so far... 5267 / 251,287
Articles
Browse latest releases
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
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Amsterdam
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 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 Casablanca
Consulate Cape Town
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kigali
Embassy Khartoum
Embassy Kampala
Embassy Kabul
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lagos
Mission USNATO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Montreal
Consulate Monterrey
Consulate Milan
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
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 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
USUN New York
USEU Brussels
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Browse by tag
AF
ASEC
AR
AORC
AJ
AM
AMGT
AE
AU
AGMT
AG
AS
AFIN
APER
ABUD
ATRN
AL
AEMR
ACOA
AO
AX
AMED
ADCO
AODE
AFFAIRS
AC
ASIG
ABLD
AA
AFU
ASUP
AROC
ATFN
AVERY
APCS
AER
ASECKFRDCVISKIRFPHUMSMIGEG
AEC
APECO
CU
CO
CH
CDG
CIA
CACM
CDB
CI
CS
CVIS
CA
CBW
CASC
CD
CV
CMGT
CLINTON
CE
CJAN
CG
CF
CN
CAN
COUNTER
CIS
CM
CONDOLEEZZA
COE
CR
CY
CTM
COUNTRY
CLEARANCE
CPAS
CWC
CT
CKGR
CB
CACS
COM
CJUS
CARSON
CL
COUNTERTERRORISM
EG
ECON
ETTC
EFIN
EZ
ETRD
EUN
ELAB
EU
EINV
EAID
EMIN
ENRG
ECPS
EN
ER
ET
ES
EPET
EUC
EI
EAIR
EAGR
EIND
EWWT
ELTN
EREL
ECIN
EFIS
EINT
EC
ECONEFIN
ENVR
ECA
ELN
EFTA
EXTERNAL
EINVETC
ENIV
EINN
ENGR
EUR
ESA
ENERG
EK
ENGY
ETRO
ETRDEINVECINPGOVCS
ETRDEINVTINTCS
ENVI
ESENV
ELECTIONS
ECUN
EINVEFIN
ECIP
EINDETRD
IV
IR
IS
IZ
IAEA
IN
IT
ICTY
IQ
ICAO
INTERPOL
IPR
INRB
IRAJ
INRA
INRO
IO
IC
ID
IIP
ITPHUM
IWC
ISRAELI
IRAQI
ICRC
IMO
IF
ILC
IEFIN
INTELSAT
IL
IA
IBRD
IMF
INR
IRC
ITALY
ITALIAN
KGIC
KDEM
KTIP
KOMC
KNNP
KWBG
KU
KPAL
KGHG
KAWK
KISL
KPAO
KHLS
KSUM
KSPR
KJUS
KCRM
KGCC
KPIN
KDRG
KTFN
KG
KBIO
KHIV
KSCA
KN
KS
KCOR
KZ
KE
KFRD
KIPR
KPKO
KNUC
KMDR
KPLS
KOLY
KUNR
KIRF
KIRC
KACT
KRAD
KCOM
KMCA
KV
KHDP
KVPR
KDEV
KWMN
KMPI
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCFC
KTIA
KPRP
KAWC
KCIP
KCFE
KOCI
KTDB
KMRS
KLIG
KBCT
KICC
KGIT
KSTC
KPAK
KNEI
KSEP
KPOA
KFLU
KNUP
KNNPMNUC
KO
KTER
KHUM
KRFD
KBTR
KDDG
KWWMN
KFLO
KSAF
KBTS
KPRV
KNPP
KNAR
KWMM
KERG
KFIN
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KTBT
KCRS
KRVC
KSTH
KREL
KNSD
KTEX
KPAI
KHSA
KR
KPWR
KWAC
KMIG
KSEC
KIFR
KDEMAF
MOPS
MARR
MNUC
MX
MASS
MCAP
MO
MIL
MTCRE
ML
MR
MZ
MPOS
MOPPS
MTCR
MAPP
MU
MY
MA
MG
MASC
MCC
MEPP
MK
MTRE
MP
MDC
MAR
MEPI
MRCRE
MI
MT
MQADHAFI
MD
MAPS
MUCN
MASSMNUC
MERCOSUR
MC
OVIP
OPDC
OPRC
OIIP
OFFICIALS
OSAC
OAS
OEXC
ODIP
OREP
OFDP
OTRA
OSCE
OPIC
OECD
OPCW
OSCI
OIE
OIC
OTR
OVP
PARM
PREL
PTER
PHUM
PGOV
PINR
PINS
PREF
PK
PE
PBTS
POGOV
PROP
PINL
PL
POL
PBIO
PSOE
PHSA
PKFK
PO
PGOF
PA
PARMS
PORG
PM
PMIL
PTERE
PF
PALESTINIAN
PY
PGGV
PNR
POV
PAK
PAO
PFOR
PHALANAGE
PARTY
PRGOV
PNAT
PROV
PEL
PINF
PGOVE
POLINT
PRL
PRAM
PMAR
PGOVLO
PHUMBA
PHUS
PHUMPREL
POLITICS
PEPR
PSI
PINT
PU
POLITICAL
PARTIES
PECON
SOCI
SY
SENV
SA
SP
SNAR
SG
SCUL
SR
STEINBERG
SF
SW
SU
SL
SMIG
SO
SN
SHUM
SZ
SYR
ST
SANC
SC
SAN
SIPRS
SK
SH
SI
TS
TU
TX
TBIO
TW
TSPA
TH
TIP
TI
TRGY
TC
TR
TT
TERRORISM
TO
TFIN
TD
TSPL
TZ
TPHY
TK
TNGD
TINT
TRSY
TP
UK
UN
US
UNGA
UNSC
UNO
UNMIK
UV
UY
UP
UG
USEU
USUN
UZ
UNESCO
UE
UAE
UNEP
USTR
UNHCR
UNDP
UNHRC
USAID
UNCHS
UNAUS
UNCHC
Browse by classification
Community resources
courage is contagious
Viewing cable 09REYKJAVIK218, IMF: ICELAND NEEDS FINANCIAL AUSTERITY
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.
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. #09REYKJAVIK218.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09REYKJAVIK218 | 2009-12-08 16:04 | 2011-01-13 05:05 | CONFIDENTIAL | Embassy Reykjavik |
VZCZCXRO0650
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHRK #0218/01 3421656
ZNY CCCCC ZZH
P 081656Z DEC 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 4234
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 REYKJAVIK 000218
SIPDIS
TREASURY FOR MYERS AND NORTON
NSC FOR HOVENIER
E.O. 12958: DECL: 12/07/2019
TAGS: ECON EFIN IC PGOV PREL
SUBJECT: IMF: ICELAND NEEDS FINANCIAL AUSTERITY
REF: A. STATE 190
¶B. STATE 176
Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D)
¶1. (C) Summary. Mark Flanagan, leader of the IMF review team
here in Reykjavik, believes Iceland's recovery could start in
mid-2010, but he cautioned that that the government must take
several critical steps to lay the necessary groundwork,
including significant fiscal austerity. Prior to the next
IMF review, said Flanagan, Iceland must: 1) complete the 2010
budget and medium-term fiscal strategy; 2) develop a public
debt management strategy; 3) recapitalize the banks; and, 4)
reform/ strengthen supervisory authority. Despite the
popular attention focused on Icesave, the budget deficit and
recapitalizing the Central Bank and the private sector banks
are the most important factors in Iceland's growing debt
burden. Flanagan appeared confident that Icelandic
authorities understand what they need to do. Whether they
and the coalition in parliament can muster the political will
to do so remains an open question. End Summary.
¶2. (C) On December 7, Charge and Econoff discussed Iceland's
progress on its IMF program with Mark Flanagan, leader of the
IMF team here on a two week visit to Reykjavik. Although
Flanagan believes Iceland's recovery could start in mid-2010,
he cautioned that that the government must take several
critical steps to lay the necessary groundwork as well as
undertake significant fiscal austerity measures. Prior to
the next IMF review, said Flanagan, Iceland must: 1) complete
the 2010 budget and medium-term fiscal strategy; 2) develop a
public debt management strategy; 3) recapitalize the banks;
and, 4) reform/ strengthen supervisory authority. These
steps are the keys to a successful recovery. As for the
current economic situation, Flanagan said that there had been
limited decline in output as a result of fiscal stimulus and
that recovery to positive economic growth could come by the
third quarter. By the end of 2010, he forecast that
inflation would be about four percent. For interest rate
policy to be effective, Iceland should enforce capital
controls more strictly.
¶3. (C) Managing public and private sector debt would be a key
challenge for Iceland, Flanagan noted. A significant portion
of Iceland's public sector debt will roll over in the next
three years, he said, causing the country's net debt to rise
by 14 percent of GDP. Consequently, fiscal consolidation is
critical. The Ministry of Finance should have responsibility
for debt management, but the Ministry eliminated its debt
management office several years ago when Iceland ran a
surplus and has no official dedicated to work on the issue at
present. The IMF is already providing technical assistance
in this area.
¶4. (C) Flanagan stressed the need to address insolvency in
the private sector lest the private sector stand in the way
of public sector fiscal consolidation. He estimated that
half of all corporations need restructuring and a quarter of
all corporations are or will be insolvent. Corporate
restructuring is difficult and will take time. A key
constraint in Iceland is the small size of the court system,
where 48 judges to handle all cases, criminal and civil.
Flanagan called for Iceland to look at ways to facilitate
debt restructuring outside of the courts to avoid
overburdening the judicial system.
¶5. (C) Flanagan remarked several times that the country's
overall debt level, not the Icesave debt, is the largest
problem that Iceland faces. Three larger contributors than
Icesave to the overall debt, he said, are the deficit
(projected to be 14 percent in 2009), the Central Bank's huge
liquidity losses suffered immediately after the collapse, and
recapitalizing the banks. To illustrate this point, Flanagan
noted that about 20 percent of GDP would be needed to
recapitalize the Central Bank's liquidity losses, while the
Icesave debt is expected to add 10 to 15 percent of GDP to
the debt load in 2016. He also stated that Iceland's
problems stem, in part, from the fact the country has a
tax-rich structure that is suffering from a sharp decline in
tax revenue, for which a structural adjustment of 10 percent
of GDP is necessary. Despite these larger issues, Icesave
has played a significant role in the delay of Iceland's
economic recovery, and people have been easily distracted by
"silver bullet" ideas such as adopting the Euro. Icesave did
not, however, delay the IMF's last review of the program,
Flanagan noted, because the policy content for the review was
not ready until early August.
REYKJAVIK 00000218 002 OF 002
¶6. (C) The IMF believes that Iceland's political leadership
understands both the gravity of the situation and the
requisite steps to put the economy back on track. Flanagan
said that a deal to recapitalize Landsbanki bank, an IMF
requirement, should be reached soon. The political
bottlenecks due to Iceland's small size, however, mean
progress will occur at a slower pace. (Note: the Ministry of
Finance, for example, only has 75 employees. End note.)
When asked about the future of the IMF program if parliament
were to reject the Icesave bill, Flanagan stated that, in
theory, the IMF could adjust the program, but that it would
require significant reworking. The IMF would like to
continue with the current program and, as the financing from
the Nordics is essential to the current program, he is
hopeful that parliament will pass the Icesave bill and
receive access to the Nordic loan.
¶7. (C) The IMF expects to reach agreement with the Government
of Iceland on the policy content for the next review by the
time Flanagan departs next week. The next review could take
place as early as late December or early to mid January.
¶8. (C) Comment: Flanagan seemed confident that Icelandic
authorities understand what they need to do. Whether they
and the coalition in parliament can muster the political will
to do so remains an open question. End Comment.
WATSON