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Iceland wins compensation case

Iceland does not owe money over Icesave collapse.

The EFTA (European Free Trade Association) court on Monday ruled that the government of Iceland had not breached the deposit guarantee directive for savers in the collapsed Icesave bank.

Reykjavik had been charged with  failing to guarantee minimum levels of compensation to UK and Dutch savers, who were bailed out by their own governments.

Icesave, an online savings bank, was a victim of the 2008 collapse of Iceland’s banking system.

"Iceland has from the start maintained that there is legal uncertainty as to whether a state is responsible for ensuring payments of minimum guarantees to depositors using its own funds and has stressed the importance of having this issue clarified in court," the Icelandic government told the BBC.

When Iceland’s banks were in crisis, UK Chancellor Alistair Darling bailed out 230,000 UK savers in Icesave to the full extent of their savings - about £3.5bn. This was more than the maximum   decreed by European rules for deposit compensation schemes.

The EFTA judgment said, "the Court holds that the Directive does not envisage that the defendant itself must ensure payments to depositors in the Icesave branches in the Netherlands and the United Kingdom, in accordance with Articles 7 and 10 of the Directive, in a systemic crisis of the magnitude experienced in Iceland."

The Icelandic government originally agreed to re compensate its European neighbours in 2009 but the move was very unpopular. Icelandic people complained that the payouts would bankrupt them and that the UK and Dutch governments had compensated their citizens a much greater amount than required by European legislation.

The president of Iceland refused the deal and a referendum was held in March 2010,  in which the Icelandic population strongly rejected the move.

A second referendum on a new deal on repayments also resulted in a “no” voter in April 2011, though by the much narrower margin of 59 per cent to 41 per cent.

Nonetheless, Iceland has in fact re payed the British and Dutch governments more than 90 percent of the minimum deposit guarantee the two governments were obliged to pay.

There are concerns that this ruling could undermine cross-border banking in the European Union. Some governments worry retail depositors could be left unprotected in the case of another banking collapse.

This risk appears to have been mitigated by a change in the law since the collapse of the Icelandic banks. Whereas before there was no minimum requirement for EU banks to protect deposits of their savers, at the moment each EU member state must insure they have coverage of up to €100,000 for every depositor.

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Geoffrey Howe dies, aged 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.