From Iceland — The Game Of Risk

The Game Of Risk

Published February 1, 2013

The Game Of Risk

“Congratulations!” This word was frequently shouted this past Monday. Why? Did Iceland’s national handball team win the European Championship? Or did an Icelandic ‘musician’ win the Eurovision Song Contest? No. On this day, at 10:30 AM, the EFTA Court had ruled Iceland victorious in the so-called “Icesave case.” Iceland had won the European Championship of Lawyering.
Icelanders were happy, and understandably so. Picking up the bill, not to mention a rather large one, is seldom an enjoyable affair. The island’s most prominent female vocalist posted on her Facebook wall that “sometimes justice is fulfilled,” a notion that mostly all Icelanders could agree with. The leaders of the government called it “a great victory for us” and said that “everyone should be merry and not seek out culprits.”
One of the opposition leaders in parliament, a great proponent of referendums, called the court’s decision “a victory of the nation over the tyranny of the government.” Another opposition leader noted that Iceland had prevailed over the oppressive policies of foreign government, adding that Iceland’s government should “apologise to the Icelandic nation and that “we” should learn from the whole affair to “always stick together when it comes to defending Icelandic interests.”
So, the message from the folks in parliament was simple. Government leaders said “phew” and “don’t blame us,” while opposition leaders said the verdict was a victory for the people over Iceland’s government and over foreign superpowers and institutions.
Yes. “Congratulations on the victory, Iceland!”
Seven long years after the Icelandic bank Landsbankinn opened its Icesave branches in the UK, the Icesave issue was finally resolved. No more Icesave-Christmases. No more Icesave-press conferences at the President’s office. No more Icesave deals. No more referendums. Everyone was happy. Still, the issue hadn’t quite faded away.
But how did an Icelandic bank opening a branch in the UK eventually lead to Iceland being summoned to EFTA Court? Well, that was, more or less, the result of the Icelandic nation’s decision, a decision made in a referendum on April 9, when “we” said no to the so-called “Icesave III” deal, thus pushing the UK and the Netherlands to take Iceland to court. So, Icelanders decided to take a risk by pursuing the unknown, rather than taking the known, road out of a given situation.
This is something Icelanders have been keen on doing. A few years before—in 2005, to be exact, a year before Landsbankinn opened its first Icesave branch in the UK—a telling speech was made at the Walbrook club in London. The speaker was Iceland’s then and current President, Mr. Ólafur Ragnar Grímsson, and his speech touched on the special nature of Icelanders and why they were so successful in modern business. To quote:
“Icelanders are risk takers. They are daring and aggressive. Perhaps this is because they know that if they fail, they can always go back to Iceland where everyone can enjoy a good life in an open and secure society; the national fabric of our country provides a safety-net which enables our business leaders to take more risks than others tend to do.”
The president was, and to some extent still is, right about this. Icelanders are risk takers. To bring the Icesave issue to court was, like the decision to engage in the Cod Wars back in the day, a risky endeavour. Amazingly, both risks paid off. But is taking a risk always the right thing to do? Where did this Icesave issue come from anyway? Well, in short, it came from taking a risk.
When the Icelandic economic wonder faced “a bit of a lull” during the so-called “mini-crisis” of 2006, Landsbankinn decided to open the Icesave branch in the UK to resolve what they then perceived as a short-term cash flow problem. As Icesave was a branch, not a subsidiary, the money could easily flow back to Iceland, where it was promptly used to resolve the bank’s and the bank owner’s cash problems, as well as those of the bank’s most prized customers. This worked out beautifully short term, but ultimately turned out to be a disaster; Landsbanki collapsed in the fall of 2008, leaving depositors in the UK and Netherlands unable to access their funds.
Risk-taking is a strange beast. It can either pay off or bite you in the ass. Games are often all about taking risks. Just ask any member of Iceland’s national handball team. In life, taking risks is sometimes necessary. However, when the welfare of others is at stake, many would at least consider other safer options, or so one would hope.
Let’s imagine a hypothetical scenario. Say a man is driving his car to the airport at 170 kilometres per hour. With him are his wife and their two children. They are about to miss their flight to Tenerife, or some other sunny resort. A few things can happen: 1) The family makes it on time for the flight and gets to kick back on a sunny beach. 2) The car is pulled over by the police, and the driver is fined and loses his license, and they miss their flight. 3) The driver loses control of the car and veers off the road. Whether he and his family ultimately survive the ordeal is unknown.
Now let’s say that the first scenario plays out. Would it be appropriate for her husband, now safely aboard the airplane with his family, to demand that his wife apologise for having suggested that they simply rebook the flight rather than take the risk of speeding to the airport? I think I can safely assume most of us would not find that demand fitting.
Taking the Icesave issue to court, rather than settling it out of court, was a huge risk for Iceland—a risk that paid off. The instigators of such risk-taking, namely the president of Iceland, the Progressive party MPs, the Citizens Movement MPs, the InDefence and Advice lobby groups and, last but not least, 60% of the Icelandic voters, were, last Monday, along with the rest of the country, saved from the chopping block by the EFTA Court. So we all woke up kicking back on a sunny beach.
The risk paid off, but that doesn’t mean that those who played it safe were against Icelandic interests. It was impossible beforehand, for the most capable of legal experts, to foresee that Iceland would win the case. And whatever people thought of the “Icesave III” deal, that deal, with all its faults, was still a rather foreseeable and safe affair.
Wisdom in hindsight is of little worth if any—something that the former Prime Minister Geir H. Haarde should be all too familiar with. Few people have had to sit through as many I-told-you-sos as he did during his trial last summer—more or less everybody who took the witness stand claimed they had foreseen the Icelandic economic collapse of 2008. And why was our former prime minister in court? Well, he had taken a risk. He had hoped that by doing as little as possible, instead of perhaps endangering his political career by making brisk and tough decisions, that the crisis of 2008 would simply pass Iceland by. It didn’t, and in the process Iceland’s economy and his political career came to a crashing end. Had his risk-taking worked out, however, he might still be prime minister, or perhaps the whole thing would have gone up in flames anyway. Who knows?
Several MPs from the opposition are now demanding that the current government apologise to the nation, or even resign, all the while patting themselves on the back for having insisted that the Icesave case go to court. With elections looming, one must ask if these same people are fit for government. If they were in power in a similar situation, will they think about what’s best for the country, or will they always opt for the risk, and hope against hope that destiny is on their side, like our aforementioned former prime minister did? And shouldn’t those who created the problem, and did nothing to resolve it, simply enjoy the victory like the rest of us, rather than boisterously singing their own undeserved praises while declaring those who would have done the sensible thing opponents of Icelandic interests?
That said, last Monday saw an unlikely victory for Iceland, and one we should assuredly enjoy. “Congratulations, Iceland—today is your day!”

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