Iceland Banks May Be Asked to Forgive $2 Billion After Protests

Iceland’s banks may come under pressure to forgive about $2 billion in mortgage debt after protests this week prompted the government to consider proposals from the island’s homeowner protection group, Bloomberg reported. “The debt the banks have to write off could very well be very challenging for them,” said Economy Minister Arni Pall Arnason, in an interview in Reykjavik. “So be it. The banks have to acknowledge quickly that current debt levels are unrealistic and that timely write-offs are necessary. Full stop.” The government is eager to show voters it is committed to reducing families’ debt burdens after the Oct. 4 unrest. The protests drew bigger crowds than in the weeks before former Prime Minister Geir H. Haarde’s administration was ousted in January 2009. The Interest Group of the Homes, which represents households demanding debt relief, says banks should write off about 200 billion kronur ($1.8 billion) in mortgage loans to help the 39 percent of homeowners who are technically insolvent. Prime Minister Johanna Sigurdardottir held emergency talks after the protests, in which about 8,000 demonstrators gathered to express their anger over rising homeowner insolvencies. Sigurdardottir told lawmakers yesterday that no families should lose their homes because of unserviceable debt, adding that her government will contact about 200 households at risk of foreclosure this month to try to prevent their homes being auctioned off. Read more.