Grimsby and Cleethorpes Liberal Democrats

Icesave, Iceland and the EU: whose debt is it anyway?

Let's start by what I'm not going to talk about

Firstly I'm not going to talk about how to vote in any of your upcoming referendums. I'm not much help on that sort of voting anyway. My first vote as an adult was in our one and only national referendum in the UK back in the 1970s on whether or not we should remain in the then European Economic Community. My parents were socialists - which party, the Labour party, was then anti - my grand-mother was French, which made me European.

I walked back and forth to the polling station unable to make up my mind. I did vote - eventually. I was determined to. But these choices are not easy, as with the ones you will face, however it will be your choice and will doubtless depend of many factors: personal, national, European and international.

You must make your own conclusions: it's your vote.

Secondly, I'm not going to talk about fish. I'm no expert despite representing the ports of Hull, Grimsby, Bridlington and Scarborough. All I do know is that fishermen are very noisy and vocal about the EU. Your country would have a lot to bring to that debate within the EU, which I would welcome, and no doubt the final package on membership would reflect the importance of this industry to your economy and your national psyche.

Before thinking about what I was going to say today, I looked back at my last speech here in the spring of 2008. I note that I reflected in opening on the linkage between our economies and the growing sense of unease in the April of that year. We now know what happened between then and the end of that year to the banks in your country and mine and indeed elsewhere. One could say that your tectonic plates moved here and we all felt it, to a greater or lesser extent.

What we do not know as yet, is are we through all the aftershocks? And also, just how do we deal with the aftermath? Our international institutions have not been designed nor are accustomed to dealing with financial meltdown in modern functioning democracies. It challenges all our ideas of national, governmental and individual responsibility and our ideas about debt, guilt and justice. Just who is indebted to whom and who should be held to account? Individuals, bankers, regulators, government ministers, international institutions?

It is here that I want to introduce into my speech two characters from a Victorian novel - The Water Babies written by Charles Kingsley in 1863. Tom, the poor child chimney sweep, he encounters two nurses. The first is Mrs Doasyouwouldbedoneby. She is a nice baby cuddling nurse, sympathetic, merciful, the one you would want to choose. Then there is the other one (and you can boo and hiss here if you like) - Mrs Bedonebyasyoudid - she's out for 'payback', some would call it justice but I think maybe it goes beyond that.

I remember as the Icesave crisis broke I was actually in Germany. So that evening I watched the news both on German TV and on the BBC. The contrast was stark. On German TV there was no panic just matter of fact reporting that the interest rates offered by your banks were exceptionally high, therefore there was clearly a risk with investment and customers should have been aware. Compare and contrast to British TV which portrayed a sense of outrage: how could we have been allowed to put our life savings into these dodgy investments? So the British investors expected to deal with the kindly Mrs. Doasyouwouldbedoneby, whereas the Germans it seemed were less trusting and expected the strict Mrs. Bedonebyasyoudid.

Apart from being an interesting reflection on national characteristics, these also tell us something about debt. Debt always had two sides. Certainly at the outset both a willing lender and a willing borrower. Of course in modern times if a contract is inappropriate, too onerous for a consumer (or indeed the weaker party to a deal), most of our legal systems acknowledge ways of setting aside such a contract of protecting the weaker party. But the fact remains as investors, or as borrowers, we should know what we are getting into; we are all, as it were, adults. Whilst we may all be more wary now, there has to be an acceptance of some level of risk to make the financial world go round - or so it seems.

However, the level of risk your bankers built into their systems, or were allowed to build into their operations, with hindsight, was clearly too much. Too much for your country to bear - and too much for our Prime Minister, who is clearly a nasty Mrs. Bedonebyasyoudid, although I would certainly like to see him turn into a Mrs. Doasyouwouldbedoneby (because of course you never know what may happen next and when you will need friends).

Of course, there have been many acres of print written about how your country might get out of its current position - some less helpful than others. That you might pay us the UK back in a steady flow of our favourite teatime supper - the fish for our fish and chips, or that the Americans might come back to Keflavik and bail you out. Then perhaps one of the most interesting one's Mark Hannam, a former banker (are all bankers former bankers now?), writing in Prospect magazine that Britain has no right to demand money back from you but that we should be giving you cash using part of the proceeds from our windfall tax on bankers bonuses and only then would we have the truly ethical foreign policy our government trumpeted some 12 years ago. Perhaps that's the nub. Because you are a modern functioning democracy and economy, we do not see your problem and its linkages to ourselves in that light.

I remember trying to demonstrate those linkages in the aftermath of the crash. I visited an Icelandic company near my home and explained the knock on loss of hundreds of jobs across our regional economy if they went under. There were howls of outrage from government politicians. Their main concern - and it was a grave concern for many individuals - was their loss of savings. It all depends on your perspective.

The fact remains as debtors and creditors we are different sides of the same, single linked problem and the way out has to be comfortable for both parties, otherwise it will not be sustainable and everyone will lose. It is just the same as years ago when as a lawyer some of the work I did was debt collecting for banks and for mortgage companies. The very last thing you wanted to do on behalf of the bank was to sell the property and put people on the street. A sensible and workable repayment formula has to be found. I hope that is what is happening with Icesave as we speak. I hope that my Prime Minster is turning is indeed turning into a Mrs Doasyouwouldbedoneby. Then you, we, all can move on.

Of course, the other way out for you is via the EU to the euro, but I have always said that this is not a quick fix. It may not even be a fix at all - and if you want to join us it has to be for a wide range of reasons, not just a safe haven in a storm. Looking at Greece, of course there is no guarantee that such a safe haven exists, as to function properly the Eurozone has to have strict rules; no bail out. However, it looks as though someone there was sailing very close to those rules if not crossing them - bankers again. But whoever it was, a number of Eurozone countries look shaky - even some on the outside of the currency in the present circumstances.

It is here I think that you have an advantage, yes an advantage from bitter experience. You have begun to deal with the fall out of this crisis. You have your parliamentary enquiry. You have legal processes, so in that sense you are further ahead of many of our countries in starting to come to terms with this, societally and politically. It may not sound very positive but your difficult experience may be valuable elsewhere.

For instance, I fear in my own country we have not yet acknowledged the depth of what has happened to our economy. It is being pushed off to the other side of our national election in May. Likewise there may, as I have already alluded, be other casualties around Europe. There is no doubt that what has happened, indeed is still happening in the financial sector will force us to revaluate how we deal with regulation and risk at both a national and international level. It will perhaps also force us to re-evaluate our whole relationship with banking and money and how the world economy functions. You have an important place and contribution in that reassessment.

But what about Europe, the European Union and its place in this debate? Well, when I was here in April 2008, I argued that we now have a reformed EU that was missing Iceland. I still believe that to be so. The issues are simple. You bring to our table your knowledge on fisheries, your very unique contribution and possibilities in terms of sustainable energy resources and your strategic position as an Arctic nation. These should make you confident.

But by the same token that does not mean that the EU is sitting there waiting to welcome you with open arms. You have some PR to do. There are many who feel, on the EU side: 'oh well they just tipped up when times got rough, they weren't interested otherwise'. You know before I came I have to have the authorisation from our President; his letter said fine but please ensure you represent the Parliament's view on Iceland's application for membership. So just to be careful I got my office to search through all recent resolutions, reports and so on. We found just one official statement which mentions you with Croatia and Turkey as all having to be treated equally. That was it and that is it.

I have no doubt that you are among the best applicants we have had, but by the same token something has gone wrong here and you have to persuade us, as much as you have to persuade yourselves, that you really want this.

So you will ask me why should you want it? My answer is twofold. On one level it is about my two characters from the Victorian novels but I will come back to them at the end - you have to wait. On another level, I think it is about style of democracy and parliamentarianism that would allow you to exercise your proper place in an increasingly complex and interlinked world. Just as you have been through changes, our institutions have been through a set of fundamental changes, the results of which are only now becoming apparent.

The parliament I am a member of is very different from its predecessors. About a half are new members; many of them former ministers, even Prime Ministers'. We have several former Commissioners. The Parliament is now, so it seems, the European institution of 'choice'. Under Lisbon, the reform treaty, we have hugely increased powers, and yes in the area of fisheries too. I have just been part of a small group negotiating with the Commission the so-called framework agreement about how we will work together in the future; the whole ethos is equal treatment of the Parliament with the Member States in Council.

Likewise, in matters of international agreements, last week the Parliament stood up and said 'no' it was not going to rubber stamp the agreement on SWIFT to the detriment of our citizens personal privacy. The US would not expect such an agreement without the endorsement of their Congress so why should it expect Europe to be any different? Your parliamentarians should, as I have always argued, have the chance on your behalf to be a part of all this, watching out for you in an international context, exercising democratic oversight and choice over the issues that no government alone can reach. I can understand that you may not have a great deal of confidence in politicians at present, but the European dimension provides an additional and collective level of democratic checks and balances that might help restore confidence. I have to say in your shoes I would have more trust in the combined transparent working of an international parliament than in just one national government.

It is here that I have to say as an unashamed pro-European that the other facet of the European Union that I would reach for in your position is linked to this. It is its sense of collectivity, of solidarity. There are times when it can be very tangible. Imagine my own region two summers ago brought to its knees by extraordinary floods. I will never forget. It was like a scene from a disaster in a developing country as in local and very familiar streets to me, families stood with all their belongings and furniture in the road. Unbelievable! And where did much of the relief money come from - to our comparatively wealthy and modern state? From the EU. The biggest award the EU's Solidarity Fund had ever made at that stage. It is just a small example but we know that in terms of climate and finance we live in extraordinary times and it is good to know that in the European Union it is Mrs. Doasyouwouldbedoneby who is waiting to embrace and help you.

I think your own sayings from the Havamal could put it no better than how I would wish for your country's relationship with the EU:

A true friend whom you trust well and wish for his goodwill: Go to him often exchange gifts and keep him company.

Thank you.