The Great Debate UK

from The Great Debate:

Icelandic, Greek sagas show sovereign risks

-- James Saft is a Reuters columnist. The opinions expressed are his own. --

Developments in cash-strapped Iceland and Greece nicely illustrate two themes for 2010: sovereign risk and financial balkanization.

Iceland is balking at crushing terms demanded as part of its making whole overseas depositors in its ruined banking system, while Greece is involved in a game of chicken with the euro zone authorities over how, when and with whose assistance it heals its fiscal difficulties.

Like so many of us paying bills in January we ran up last year, they face a depressing prospect and no easy way out.

First, Iceland, whose president vetoed an agreement with Britain and the Netherlands to pay about $5 billion towards the costs of reimbursing depositors in its failed Icesave bank, saying he would put the bill to a referendum. While British and Dutch officials have mustered up a good show of outrage, President Grimsson's move should not surprise; he was petitioned by a fifth of the population, each of whom can look forward to helping to pay back their individual $17,000 share of the costs.

from The Great Debate:

Betting on the unthinkable in the euro zone

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Some crises bring partners closer together. Some, as investors in the euro zone are likely to discover this year, drive them further apart.

Look for rising tensions about fiscal and monetary policy among the bloc's 16 member nations, and for a bigger penalty to be imposed on the euro and some euro zone assets against the possibility of a breakup or a secession from the currency group.