Lögberg-Heimskringla - 05.11.1993, Page 4

4 • Lögberg-Heimskringla • Föstudagur 5. nóvember 1993
Faroes founder on reef of recession
JENS KRISTIAN VARIJ
by Blrna Helgadóttir
Faroe Islands
The European
The Faroes are associat-
ed in the minds of
most Europeans with
adverse weather reports on
the shipping forecast. But
the dark cloud of depression
hanging over these remote
north Atlantic islands has
nothing at all to do with
meteorology.
After a decade of profliga-
cy and reckless borrowing
which brought the Faroese
the unlikely accolade of the
highest living standard in the
world, thc economy is now
in ruins.
Fish stocks have col-
lapsed, unemployment is
soaring and, as the recession
deepens, the population rate
is declining as
thousands of
Faroese decide to
emigrate.
This week, a
delegation from
these . self-ruled
islands went to
Copenhagen to
negotiate the
fourth emergency
aid package in a
year from their
Danish overlords.
The national
debt amounts to
7.8 billion Danish
krone (Ecu lbn) -
or Dkr 170,000 for
each of the 45,000
people living on the islands.
The annual interest rates on
the foreign debt amount to
around Dkr900m - 15 per
cent of gross national prod-
uct. Since October last year,
Denmark has handed out
Dkrl.85 bn to its profligate
dependency, in addition to
the Dkr lbn annual grant the
islands receive.
This time the iglanders
asked for Dkr 3bn - Dkr 4bn
to cover a rescue package to
save its banks from closure
and to reduce next year’s
budget deficit. But the
Danish govemment handed
out just Dkr 1.3bn in loans
turning down a request for
an additional Dkr 1.7bn and
calling on the Faroes to
make savings of Dkr 250m in
their budget.
Few islanders can see
any way out of the hor-
rifíc tangle of debt and
depression. “The situation is
dismal, terrible,” said Kjartan
Hoydal director of the min-
istry of fisheries.
“This has been a real
annus horribilis,” said
Hanna Johansen, a civil ser-
vant. “It’s as if there is a dark
cloud hanging over us. There
is no joy here anymore.
People stay in in the
evenings,- rrever
going out to restau-
rants or dances.”
The Faroese are
a doughty race who
take pride in keep-
ing up appearances,
so there is still little
outward sign of the
depression. Those
who have not lost
their homes main-
tain them, and
social problems
such as crime and
alcoholism are kept
in check.
But there are
plenty of indica-
tions of the deep
recession the
islanders are facing.
Last year, unem-
Above:
Scaling down:
the crisis has been
blamed on over--
expansion in the
fishing industry.
Left:
An idyllic scene...
but
3,000 islanders
emigrated
iastyear.
ployment benefit was intro-
duced for the first time and
now unemployment is run-
ning at 20 per cent, often
higher in the outlying
islands.
This is a far cry from the
boom years of the 1980s
when an acute labour short-
age meant that thousands of
foreign workers were
brought into the country.
The most telling statistics
are the emigration figures.
Last year 3,000 people —
over six per cent of the popu-
lation — left the shores,
mostly for Denrpark.
The Faroese had long
been one of the few small-
island communities in the
world that had a growing
population, so these statistics
are a grievous blow. Most of
the emigrants are well-edu-
cated people in their twen-
ties who are taking their chil-
dren with them “two genera-
tions at once”, as one local
put it. Anna Maria, 31, a
highly qualified fish export
saleswoman, is going to try
her luck in Germany. 'A
friend is already doing well
for an export company in
France.
“There is little hope left in
the Faroes,” she says, “and
besides, this highly conserva-
tive community is showing a
tendency to sack women and
keep what little work there is
for the men.”
One of the chief factors
being blamed for the crisis is
the massive over-expansion
of the fishing industry.
During the 1980s, foreign
credit was all too easily avail-
able and the government was
soon borrowing billions of
kroner to modernize the
trawler fleet and fish process-
ing plants that accounts for
94 per cent of the country’s
exports.
Investment was practical-
ly risk-free because the
government did not
allow any processing plants
or trawler owners to become
bankrupt and the industry
consumed Dkr 35bn of sub-
sidy.
There are now 200
trawlers in the home fleet
and 22 plants, nearly qll of
them in receivership. If they
were all to be fully opera-
tional, they would need
170,000 tonnes of fish annu-
ally. This year’s catch will be
around 60,000 tonnes.
The borrowing spree
spread to every section of
society. Local government
built many kilometres of new
roads, houses and office
blocks mushroomed, banks
happily handed out loans for
second or even third cars. By
the late 1980s, the Faroese
were enjoying consumerism
on an unprecedented scale.
“We over-invested in our
infrastructure but at least
that is an asset that we can
keep,” says Hoydal. “The
over-investment in the fish-
ing industry did real harm as
it led to over-fishing.”
Now the fish processing
plants have nearly all been
bought out by the govern-
ment for Dkr 600m and sold
to one company, Foroya
Fiskavir-king, for half that
sum. Most of the Danish and
Faroese creditors have had
to write off their debts.
The new streamlined fish-
ing industry went into
action last month.
Managing director of
Foroya Fiskavirking,
Bjarti Mohr, said that,
although five or six
plants would be
enough to handle the
annual catch, the com-
pany would probably
keep more open.
“We do have a
responsibility to the
community — people
need jobs.”
It is also thought that
the fishing fleet will be
reduced by at ieast a
third. Mohr says that
with a monopoly con-
trolling the industry,
plants will be able to
specialize and start
competing on the
world market rather
than competing with
each other.
But with experts predict-
ing that it could take up to
20 years for fish stocks to
recover, other potential
resources are having to be
looked at. Harbour facilities
and registrátion are already
being leased to a range of
Russian vessels.
The Faroes’ greatest
hope for the future is
the recent discovery of
oil close to their waters. But
even black gold may not be
able to save the islands from
ruin. Most of the area in
question lies in a “grey zone”
between the Faroes and
Britain.
The benefits will not begin
to be felt for at least a
decade, by which time it
could all be too late.
Danes balk
at new rescue
by Grit Bendixen
The economic collapse
of the Faroes is tuming
into a growing political
scandal in Denmark.
Years of warning signals
and ever more alarming
reports throughout the late
1980s were apparently
ignored by the prime minis-
ter’s office.
Reports on the decline of
the Faroese economy col-
lected dust in government
offices and were never for-
warded to the Danish parlia-
ment for debate.
MPs from the right-wing
People’s Progress Party are
now calling for a special
judicial inquiry to fully
investigate the background
to the scandal.
A report just published by
the public accounts commit-
tee strongly criticizes both
the islands’ authorities and
Danish supervision of the
funding arrangements.
Dariish taxpayers, already
fed up with endless reports
of mismanagement and
waste on the Faroes, are
now being asked to pay even
more to the islands.
A. total package of
between Slcr3 billion
(Ecu 318 million) and
Skr4 billion was being
sought to finance the islands’
foreign debts, prevent the
Faroese banks from collaps-
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