Good news for once! It seems that Michael Bless, the CEO of Century Aluminium which is trying to build an aluminium plant at Helguvik in southwest Iceland, is now pessimistic that the plant will ever be built and says it might be shelved. At a meeting with Bank of America Merrill Lynch, he said that building will not continue unless it is seen that the plant would be very profitable – which is unlikely due to the low price of aluminium at the moment and the fact that energy to the plant has not yet been finalised, nor have the costs of the hypothetical energy. I have written a number of articles and blogs about the problems of the Helguvik plant – does anyone want another one about the current state of affairs?
It now seems that one of the main proponents of the plant outside of Century themselves, the mayor of the local town of Reykjanesbaer Arni Thor Sigfusson, is also much more pessimistic than he was about the plant being built. He had always welcomed the advent of the plant because it would provide employment for the area.
Iceland’s current government has been keen on getting the plant finished. No word has come from them today, maybe because they are trying to deal with the current Budget for next year and tying themselves in twists because of it.
Maybe we can now say: RIP Helguvik.
After months of waiting, Iceland’s Prime Minister (Sigmundur David Gunnlaugsson, or SDG) and finance minister Bjarni Benediktsson (Bjarni Ben) finally announced on Saturday their solutions to help home owners with the escalating loan costs that they faced after mortgage payments hit the roof in October 2008 after the bank crash. During SDG’s election campaign – and indeed afterwards – money for slashing housing loans was supposed to come from overseas creditors who owed Iceland money. But on Saturday no mention was made of overseas creditors.
SDG and Bjarni Ben have grand plans for helping Icelandic home-owners, or at least the better-off home-owners. Part of the plan involves debt cancellation of up to ISK 4 million on housing loans up to ISK 30 million, and part involves tax subsidies. A news item on the Iceland Review website explains where the money will come from:
ISK 80 billion of the indexed mortgages will be written off over the course of the years 2014-2017. The ISK 80 billion will be paid through increased taxes on financial institutions and winding-up committees of the collapsed banks. ISK 70 billion will be paid through tax incentives through pension system payments.
But a number of people are sceptical about the plan, including some prominent members of the youth section of Bjarni Ben’s Independent party and one of the Althingi members of the Independent Party, Vilhjalmur Bjarnason. And leading members of the opposition parties are unsure where the money will come from, especially as at least some of the financial institutions and wind-up committees of the collapsed banks are questioning the legality of being faced with extra taxes. Others say that many who will be helped are actually not in housing difficulties and can well afford to pay off their loans, and that it appears that those who are worst off will still be in trouble. And nothing is being done for the 20% of Icelanders who are renting accommodation, who have had to put up with astronomical rises in monthly rental payments.
SDG promised immediate help for home-owners in his election promises – most people would experience the effect of his housing loan measures just a few months after the election. But, as I have said earlier, “immediate” is a flexible term for Iceland’s current government. Now they say the measures will not be implemented until the middle of next year, as banks will need to recalculate housing loans of those who apply.
The previous Icelandic government came up with various solutions for people with housing loans, which were taken up to various degrees by home-owners. But the solutions were clearly not well taken by the public, many of whom were gullible to SDG’s promises. Will this solution work differently? I doubt it.
If the government spends money without sufficient income, Iceland will have another bank crisis on its hands.