Reykjavík Grapevine - 24.09.2010, Side 14

The Reykjavík Grapevine
Issue 15 — 2010
The short version
Since this is a tourist maga-zine, and in English, we
need to start at the beginning—
we can’t assume that folks will
know what we’re talking about.
you are Minister of finance—
how did that happen?
It happened thusly: a government fell
here in the end of January 2009, following
a bank collapse in October of 2008. This
resulted in great civic and political un-
rest, lots of troubles and hardship and the
government that was then in place was
forced to admit defeat. People had been
talking about possibly forming a national
government [where all parties collaborate]
to respond to the unrest, but the then-
government was not fond of the idea. But
they eventually became exhausted, their
coalition shattered and a new govern-
ment was formed by the Left Green Party
and the Social Democratic Alliance. The
Progressive Party supported that govern-
ment until that spring’s election.
In the elections of April 2009, we and
the Social Democrats won a pure major-
ity combined [thus eliminating the need
for the Progressives’ support] and we
formed a government. I am chairman of one of the two rul-
ing parties, and have dealt with econom-
ics and finance, so it was natural that I
would become Minister of Finance. Actu-
ally, I also served as Minister of Fisher-
ies and Agriculture during our minority
government period—that was a very busy
time—but since May 10, 2009, I have fo-
cused only on the state’s finances. It is a
big job, as a lot of the problems created by
the collapse wind up on my desk. I think
I can safely assert that no one got as big a
portion of collapse-related problems as I
did.
That’s the short version. Money. Lots of it
Can you describe taking over the
job in february of 2009? What
sort of estate did your predeces-
sor leave you?
It was hard, of course, everything
had been pretty much paralysed here
by the horrific events that unfolded and
the pressure of dealing with them. The
government that burst was not very func-
tional by the end and several matters were
frozen. So we had to pull up our sleeves
and get things moving, put a lot of proj-
ects into motion as soon as we started.
We resorted to various temporary
measures to assist companies and homes
that were experiencing trouble; we grant-
ed them various leniencies on payments
and allowed taxes to be paid over a longer
period of time. We greatly increased inter-
est relief to help families that were hurt
by how much their loans had gone up as a
result of the collapse.
Of course we didn’t manage to finish
everything we intended to, such as greatly
improving the state of our democracy by
introducing a direct, person-based vot-
ing system, a constituent assembly, etc.
We managed to complete some of those
goals, but not all. However, this was in my
view a diligent and energetic government
that was successful in doing the best it
could in the short time that it had.
As an amateur, I have to wonder
what it was exactly that had to
be dealt with...
On one hand all the loans skyrocket
along with the interest rate, the króna col-
lapses and there’s suddenly a gaping void
of money that needs to be filled... The ef-
fects on the state treasury were dramatic,
and its income basis collapsed completely.
It’s evident when you note that in 2007 the
state treasury had a surplus of 89 billion
ISK, while by the end of 2008 there was a
216 billion ISK deficit. The downswing in
state income was also unprecedented.
And the Central Bank went techni-
cally bankrupt and we had to refinance
it. That’s the largest single amount we’ve
had to pay thus far, what the state had to
shell out because of the Central Bank. We
wrote off 192 billion ISK in 2008 as a re-
sult. That’s a lot of money. Imaginary assets
This money that vanished—
where did it go?
A lot of the state’s assets burned up;
our equity lost its value and both real
and imaginary assets got lost. We don’t
mourn the imaginary assets, the bubble
assets, but a lot of very real ones burned
up and became worthless overnight, in
companies and banks. Unemployment
skyrocketed; a lot of people that previ-
ously had well paying jobs lost them,
which meant a decreased income for the
14
WHERE IS HE TAKING uS?
Iceland’s Minister of Finance is in the driver's seat
We’re still wondering: What happened? How did Iceland get knocked
so f lat on its collective ass? And what’s being done about it? So we
thought we’d call up our Minister of Finance, Left Green chairman
Steingrímur J. Sigfússon, and ask him. To our surprise, he picked
up.Here’s what we talked about.
By Haukur S. Magnússon Photo Baldur Kristjáns
Interview | Steingrímur J. Sigfússon, Minister of Finance