From Iceland — Sitting Here in Limbo

Sitting Here in Limbo

Published September 2, 2010

Sitting Here in Limbo

The political situation in Iceland, now that autumn will soon be upon us, can best be described as a sort of a limbo. We’ve had two very dramatic years, starting with a currency crisis and the collapse of the financial system. For a moment, in early 2009, during the so-called Pots and Pans Revolution, things seemed quite clear – the government that has presided over the fall was toppled, the governors of the Central Bank were forced to leave in disgrace, people in general were very engaged in politics, there was a sort of awakening, there was talk of a New Iceland. But now everything seems to be terribly muddled. The feeling is a bit like in the Bunuel movie El Angel Exterminator depicting a group of people who, for some reason, are unable to leave a dinner party. Nothing seems to get resolved. Nobody leaves – most of the old faces are still around. And there are ongoing problems that stubbornly refuse to go away – they keep coming back, making everybody more irritated each time they return.
Negotiations on the long-drawn Icesave dispute between Iceland, Britain and Holland are set to resume this autumn. There have been no meetings since Iceland’s referendum on Icesave last March. The referendum was supposed to be a turning point – it was not. The nation is waiting for the High Court to decide whether loans indexed to foreign currencies and given out very freely by the banks were, perhaps, illegal – a decision which might be a huge blow for the renascent banking system and will definitely be badly received by foreign creditors. There is an ongoing dispute as to how Iceland should use its energy resources, hydroelectric and geothermal; whether private companies – even foreigners – should have a part in this, or whether utilisation of manifold waterfalls and hot springs should be solely in the hands of the government. Then there is the debate on Iceland’s application to join the European Union. This is already quite ugly and it is set to grow fiercer still – maybe almost to the point of splitting the nation. Among the claims now made is that the EU will take over all our important resources (fish and energy), kill off Icelandic agriculture and that young Icelandic males will be forced to join an EU military force.
Iceland is a small country where public debates soon get intensely personal. It has been said that whereas Icelanders will often be able to tell a good story, they are incapable of discussing ideas. HalldoÅLr Laxness, our Nobel Prize writer, wrote in his book InnansveitarkoÅLnika: “It has been maintained that the Icelandic people are not easily swayed by arguments of reason, let alone financial arguments and less still the arguments of faith, but resolve their issues by the twisting of words and bickering about irrelevant diddly-squat; and that they become paralysed by fear and lose their speech whenever the core of an issue is touched upon.”
 I met one of the leaders of the Pots and Pans Revolution downtown a few days ago. He had been quite an apolitical person before the collapse. But, like many people, the level of corruption, incompetence and lying that was exposed by the financial crash astounded him, and so he became an activist. But now he said he was giving up. “Nobody seems to agree on anything,” he said. “I attend meetings and people just keep on arguing. Sometimes they are just unhappy that the idea came from the wrong person.” “I really can’t be bothered any more,” he added.
 There is a certain radicalisation of politics in the country. Until 2008 Iceland followed a steady course to the right under pro-finance governments with a liberalist agenda of privatisation. At this time the rich were getting richer – income distribution had suddenly become very unequal in a country that had always prided itself on egalitarianism. Bankers and financiers and their hangerson were feted as national heroes – many seem to be eager to forget this part. This was formulated by a then-celebrated right wing ideologue who said: Normal Icelanders want to make money during the day and barbecue when they come home in the evening. This chase after fool’s gold was based on an overvalued currency and easy credit, and it ended in disaster. Now there is a reckoning for many people. Households in Iceland are very indebted – a source of much discontent – and there is a marked shift to the left over nearly the whole of the political arena. Practically no one dares advocate traditional right wing policies; the old apostles of liberalism are quiet, except when they’re trying to find excuses for their legacy. This is most markedly seen in the debate on Magma Energy, a Canadian firm that bought a majority share in HS Orka, a bankrupt Icelandic geothermal company. This is now perceived as a major travesty, certainly on the left wing but also among many right-wingers. Only a few years ago government policy was to privatise energy – health and education were also on the agenda. But now nobody seems keen on putting power in private hands. Even the old privatisers can’t seem to recognise their old selves any more.
 We now have a left wing government – nominally the most left wing government in the history of Iceland – but it is disputed how far left it really is. Part of its electorate has swung even farther left. Admittedly its hands are tied. Iceland is on a strict programme from the International Monetary Fund (IMF); the current budget deficit is 25%; there are harsh currency restrictions in place, otherwise the kroÅLna might collapse again; big cuts will have to be made – 9% is the figure named for this year. The government’s plan is to spare the health and welfare system as much as possible; after all, it calls itself the government of “Nordic Welfare”. Taxes are going up. Iceland does not have the option to spend its way out of the crisis. During the former right wing governments, in place for 17 years, the tax burden of the highest earners was relieved. The idea of taxes being redistributive had almost been abandoned. But now affluent people are being taxed more heavily and levies on alcohol have gone through the roof. Even if the government wanted to it might not be able to afford to buy Magma’s stake in HS Orka. Nationalisation might of course be another way, but that is a tough choice at any time, and it might not go down well with the IMF and the European Union (EU).
So politics in Iceland have become more radical – and more querulous. On the left we see a resurgence of militants, anti-globalists and even Marxists, many of whom genuinely seem to believe that this is now a fight about capitalism itself. Having been marginal for a long time, they are now finding more people who appreciate their kind of politics cum activism. Many of these people are or were members of the Leftist-Greens, whose leadership is accused of betraying their leftist credentials by working with the IMF, negotiating with the EU and restoring the banking system. Two of the three large banks have now been nominally taken over by foreign creditors. The meetings of the parliamentary group of the Leftist-Greens are said to have become emotion-laden gatherings where MPs burst into tears or shout at each other.
 By far the most vocal group on the right is the anti- EU faction. At the moment it practically dominates the Independence Party, the broad right wing party that has been in power in Iceland for most of the republic’s history. This anti-EU sentiment is promoted by DaviÅL<eth> Oddsson – former prime minister and governor of the Central bank and now editor of the daily newspaper Morgunbla<eth>i<eth> – and by a group of very vocal bloggers who thrash their opponents with accusations of treasonous behavior daily on – a blogsite connected to Morgunbla<eth>i<eth>. The Independence Party also has a pro-EU faction, more in line with the Scandinavian right wing parties, but it is cowed by Oddsson and the blog army. There have been murmurs of it leaving the party, which is held together more by its history and traditions than its political coherence. But now nationalism is more the order of the day than liberalism. A government of Leftist-Greens and the Independence Party has even been suggested though this could only happen after new elections. The parties – or their forerunners – were in government together right at the end of the war, between 1944 and 1947, when it was thought wise for democratic parties to work with communists. At the outbreak of the Cold War this became an impossibility. So an alliance between the two parties would be a historic moment – its first job would, of course, be to withdraw Iceland’s EU application.
But the public that became very politicised after the crash is fast losing its interest. Trust in politics and parliament is near nonexistent. After the collapse this was manifested in demonstrations – now it seems more likely that people will withdraw into their houses during the long Icelandic winter months. Paradoxically there are even signs that The Independence Party, blamed by most for the collapse, might regain its former position. Maybe because the party is a phenomenon that people know and think they understand – rather than the uncertainty and confusion that reigns. The public debate is very confusing, with bloggers shouting abuse, small matters blown out of proportion and big issues going unresolved. Certain crash-related elements seem only to have the agenda of creating confusion. To avoid the investigations and, perhaps, the judgment of history, nobody has really accepted responsibility for what happened. In this clamor it is very difficult to discuss ideas, the future, or real structural changes. All this does not bode well for a constitutional assembly due to be held next year. We now have a very outdated constitution, handed down by the Danes in 1874. Icelanders have never given much thought to constitutional matters and the political class has always failed at changing the constitution. So now we will have an assembly of the people – hopefully for the people – where the idea is to leave vested interests and cliques that have dominated Icelandic society at the door. But success is by no means sure. This might end up being a long-winded affair – even if a new constitution is foreseen for 2013 – and in the end politicians will surely be unable to keep their hands off it.  

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