From Iceland — Iceland Two Years After the Crash

Iceland Two Years After the Crash

Published October 4, 2010

Iceland Two Years After the Crash

Iceland has gone through several phases since the crash of October 2008, when the country’s banking system collapsed in the space of a week and the currency lost half its value. First there was total astonishment that such things could happen in a supposedly advanced Nordic state, then came a period of anger, culminating in the-so called ‘Pots And Pans Revolution’ of January 2009. There was even a period of optimism when we thought a new kind of society might emerge from this ordeal.
This might be called the phase of revolutionary fervour, when spontaneous citizens’ assemblies got staged in cinemas and theatres where government ministers got booed down. But since then things have become rather more longwinded. We have gone through a stage of a total lack of trust—a left wing government that took over after elections in April 2009 is considered a huge disappointment— and now we seem to be drifting into a period of apathy.

Megalomania and Gloom

It came as a shock to many Icelanders to realise that they lived in a corrupt society. The people of this large but sparsely inhabited island have often nourished strange ideas about themselves. They tend to think of themselves as being quite unique in the universe—so outbursts of extreme optimism, even megalomania, are not infrequent, alternating with periods of gloom and insecurity. Icelanders are not of a stable mindset like the neighbouring peoples of Scandinavia, for example. During the boom years, Iceland experienced the greatest stock market boom in history, and the size of the collapse is also unprecedented: Icelanders thought of themselves as being better, more clever, than the Scandinavians. This is even written up in a now infamous 2006 report from Iceland’s Chamber of Commerce, which stated that Icelanders had nothing to learn from their Scandinavian counterparts as they were better than them in every sense.

 Nationalistic Sentiments

Thus it has always been easy to play upon nationalistic sentiments in Iceland, even after the collapse. In fact, some claim that Iceland was a victim of an international conspiracy to bring down its economy. They refer to this alleged plot as “the siege”—it is a rather outlandish claim considering the losses incurred by Icelandic banks on foreign lenders, investors and savers. All the same it can be said that the Icelandic public was the victim of its own inexperience and cupidity.
During the great boom years from 2002 to 2008, most people were quite proud of the banksters, hailed by many, including the President of Iceland, as being financial wizards of a new kind. So people did not understand what was behind the facade: That the banks had been privatised into the hands of cronies of the political parties, that they were getting fat on cheap credit, that the financial institutions had been allowed to grow into twelve times the size of the economy—and this based on the kroÅLna, one of the smallest currencies in the world—and that finally the banks were robbed from the inside with huge bonuses and loans to their owners and their friends.

Ambitious Plans for Change

The bankers are now outcasts, perceived as being crooks. After the crash there was a sense of purpose, things had to be investigated and put right. The new government was ambitious; this was a time of reckoning and renewal. A criminal investigation of the banks was started under the direction of the French/Norwegian prosecutor Eva Joly, a special committee of the Parliament researched the banks as well as the failures of the government and the officialdom, an application was sent to join the European Union, it was thought necessary to change the constitution—which is an archaic piece of paper from colonial times, given to us by a Danish king in the 19th century—and there were plans to overturn the system of how fishing quotas are distributed, a very touchy subject in a country so dependent on fisheries.
All this was to be accomplished while at the same time restoring the economy and paying off huge debts, albeit under the auspices of the International Monetary Fund.

A Return to the Old Ways

This was very promising indeed, but now, two years after the crash, things seem a bit different. Maybe revolutionary fatigue has set in. A constitutional assembly is scheduled for this winter, but not many seem to be interested anymore. Interest groups have regained their confidence, including the powerful owners of fishing quotas— these quotas being one of the most important sources of wealth in Iceland.
The banks are being revived, mainly on the shoulders of the common debtor, there are just as many employees in the banks as before—while common people are struggling with their mountains of debt, the legal profession prospers. Traditional party bickering has returned after a period when the political parties seemed a bit subdued. The Independence Party, the party most responsible for the crash, is on the rise again.

Is no one Responsible?

What is also interesting is that nobody seems to accept any responsibility. Of almost 150 people who appeared before a committee of the parliament, not one politician or official—I repeat not one—accepted any blame for how they managed to allow the economy to run into such troubles, collapse, while apparently sleepwalking through the whole sordid affair.
Politicians also seem to share the ideas that the bankers and financiers are solely to blame, not those who set the rules and were supposed to enforce them. This is of course very convenient, as it absolves the whole political class as well as the civil service.
At the moment Parliament is debating whether to press charges for gross negligence against government ministers who are certainly responsible for the crash: Prime Minister Geir H. Haarde, Minister of Finance Árni M. Mathiesen, Minister of Business affairs Björgvin G. Sigurðsson and Minister of Foreign Affairs Ingibjörg Sólrún Gísladóttir. They have all resigned from politics. For the Parliament this is a rather agonizing process, as these people are fellow party members and old friends. Many of those who sit in the parliament at the moment— and even in government—might also, paradoxically, share some of the responsibility for the crash. So most likely this will come to nought. Due to statutes of limitation this court case—which should be held before a special court as stipulated in the constitution but never before convened—only reaches back to 2007, whereas the course of events that ended in the crash was put in motion much earlier, in the first years of the decade, during the privatisation of the banks and the ensuing weakening of regulation. So it seems that some of the main culprits—including former Prime Ministers Davið Oddsson and Halldór Ásgrímsson—will get off quite lightly.

The Polish Way?

Another way that has been mentioned is the Polish one. In 2003, during the reign of Davið Oddsson, parliament voted for huge increases in pensions, especially for government ministers. In Poland, old politicians and government officials from communist times have had their pensions slashed. It might be an educating and edifying experience for some of these people to live on the pension of average Icelanders— which have had to be cut because of their misguided policies and incompetence. 

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