Iceland: a nation adrift
Icelanders used to be some of the world's wealthiest people. Today, their country is bankrupt. Since the collapse of their economy last autumn, thousands have held demonstrations calling for the government to step down, which finally it did.
For the past decade, Iceland has been one of the wealthiest countries in the world. But after the country’s economy collapsed in October 2008 under pressure from billion of dollars in foreign debt, it quickly became clear that this prosperity was an illusion, rooted in risky investments made by an ambitious banking sector that is now bankrupt.
Iceland’s government was forced to take control of the country’s three major banks – Landsbanki, Kaupthing and Glitnir – in September as the value of the country’s currency, the krona, plummeted and thousands lost their savings. Public debt, meanwhile, soared and thousands of Icelanders suddenly found themselves out of work. This once-wealthy island nation was eventually forced to appeal to the International Monetary Fund for $10 billion in emergency aid.
Many say corruption was also a factor in the failure of the country’s banks.
"When you take a former CEO from the international part of Landsbanki and he is promoted to become a chief audit executive, it means he will be responsible for auditing his own work and that of his colleagues," says Johan Asgrimsson, a former accountant at Landsbanki. "And this is a violation of both domestic and international guidelines for auditing within banks."
The most pressing issues for most Icelanders right now are unemployment, families finding themselves unable to afford their homes and a spiraling brain drain, as young people seek out better opportunities far from Icelandic shores.
This exodus is understandable, given that unemployment rates are expected to reach an unprecedented 10% in 2009. One man put it simply: “If young people don’t find well-paid work, they move.”
Protests erupted in the capital, Reykjavik, following the bank collapse as thousands vented their frustration at political and economic leaders, including central bank chief David Oddson, for failing to avert the crisis.
“People are fed up,” says one man. “Icelanders can put up with almost anything but this, this is just too much. Everything is falling apart with this crisis.”
Iceland’s politicians lost all credibility with the financial collapse and months of street protests eventually led to the resignation of Prime Minister Geir Haarde’s coalition government on January 26, 2009, making him the first political leader forced out of office as a direct result of the global financial crisis.
“They haven’t done their job,” says one Icelander, referring to the country’s politicians. He says that the former minister of finance, Bjorgvin Sigurdsson, “claims he didn't know anything. He didn't meet with the governor of the central bank for a year, and he claims he has no responsibility in this whole thing.”
Despite the government’s ousting, the protests continued – reaching such a fever pitch that five days after Haarde’s resignation, police were forced to use tear gas on crowds for the first time in 60 years.
The one small hope for Iceland’s 300,000-strong population is that the current crisis will lead to an overhaul of the country’s financial and political systems that will boost its immunity to future crises.
From France24 (including a good, ~10min. video)...