Reykjavík Grapevine - 08.10.2010, Blaðsíða 14

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The Reykjavík Grapevine
Issue 16 — 2010 Egill Helgason is a man of many talents, in case you were wondering.
Besides running a political talk show on Icelandic State TV, he also runs a
literary programme there. And he blogs a lot for website Eyjan.is. Busy man!
Analysis | Egill Helgason
Here is a famous quote by
Harold Wilson: "A week is
a long time in politics". At
the time of writing, it is totally
unclear what the political situation in
Iceland will be in a week's time. The
day before saw the largest public dem-
onstration in Reykjavík since the so-
called ‘pots and pans’ revolution that
toppled the government of PM Geir H.
Haarde, which presided over the col-
lapse of the Icelandic economy.
This writer must admit that he was
totally wrong in his last Grapevine arti-
cle. It was titled ‘A Case Of Revolution-
ary Fatigue’. Some of the analysis was
fairly accurate, for instance regarding
the loss of optimism and citizen initia-
tive, which was in evidence for some
time after the crash. But when the au-
thor said that Iceland was on the verge
of descending into apathy he was mis-
taken—at least for now.
A NIGHT Of fIERCE dEMONSTRA-
TIONS
Monday October 4th was a day of fierce
demonstrations in Austurvöllur, a leafy
square dominated by the Alþingi, a
rather modest cathedral and a statue
of 19th century national hero Jón Sig-
urðsson. During summer it is a place
where people hang out and drink beer,
but that night the mood was very ugly.
Large oil barrels were beaten, bonfires
were lit, again there was a din of pots
and pans—but this was pretty far from
the exuberance of the rather joyful
‘pots and pans’ revolution.
Under the din of the protesters who
filled Austurvöllur, PM Jóhanna Sig-
urðardóttir tried to make the annual
Prime Minister’s policy speech, citing
what had been accomplished in the last
year, and what is to be done. In this way
it was a very traditional first working
day of Alþingi, but in light of the angry
crowd outside it all seemed unimagina-
tive and somehow inadequate. In light
of the circumstances parliamentarians
might have gone out on the balcony of
Alþingi and tried to talk to the crowd, in
the spirit of De Gaulle's famous speech:
“Je vous ai compris.” I understand.
WHy ARE THEy PROTESTING?
But what were the people protesting?
Well, the mood in Iceland is very som-
bre. There is a great deal of anger and
resentment after what happened in
2008. Icelanders—who admittedly can
be rather naive—suddenly realised that
they had lived in a rather corrupt soci-
ety. Trust in institutions like Parliament,
the government, the civil service and
the banks is extremely low. Many peo-
ple are a lot poorer then they were—in
the demonstrations I met an old woman
who had been tricked by the bank Glit-
nir to sell her flat and invest in shares.
Which she promptly lost in the collapse.
This woman told me she had 3.500
ISK—the equivalent of 20 Euros—to live
from every month after her debts had
been paid.
Stories like these abound. Iceland is
undergoing almost every sort of crisis
that is known in the capitalist world: A
banking crisis, a currency crisis, a debt
crisis, a ruined stock marked and a
burst housing bubble.
THE PERIOd Of EASy CREdIT
Between 2003 and 2008, housing pric-
es in Reykjavík and its outlying towns
shot through the roof. This was mostly
due to the fact that after being quite
restrictive, banks started giving out
mortgages as if there were no tomor-
row, competing with a government run
housing bank. Soon they started lend-
ing 100 percent of the price of a flat or
a house—and gradually, as ISK interest
rates were raised, loans were given out
in foreign denominations.
Iceland was traditionally a country
where few people had access to credit.
You had to be in the right clique or po-
litical party. So Icelanders have had a
tendency to regard loans as free mon-
ey—it is a fact that interest rates have
had surprisingly little effect in Iceland.
Thus in a period of easy credit, people
started taking out loans and mortgages
as if there was no tomorrow.
A POLICy Of OWNERSHIP
Some of them were of course over-
spending and acting totally reckless.
It is sometimes rather difficult to see
who deserves to be saved after this
period of excess, and who doesn’t. But
some had little choice. The hardest hit
are people between the ages of 25–40,
who were buying their first properties.
There is no rental market in Iceland to
speak of; it has been government policy
that basically everyone should own
their own property from a young age.
This is very unlike our neighbouring
Scandinavian countries. These people
therefore had no choice but to take on
debt to be able to get a place to live, at a
time when housing prices were becom-
ing ridiculously high.
After the collapse these loans have
become an impossibly heavy burden on
many households. They are either in-
dexed to foreign currencies—a practice
that was in fact deemed illegal by the
High Court in a recent verdict—or to the
rampant Icelandic inflation. At the same
house prices have been falling steadily
and they have still not found their bot-
tom, salaries have fallen to a level of
many years ago, many people have less
work or are even unemployed.
RESuRRECTEd BANkS
The present government has been very
clumsy in dealing with this problem, but
this is what’s really poisoning political
life on the island: During the collapse
all deposits in banks were guaranteed
by the government and they still are,
billions were put into the rescue of
money market funds where more af-
fluent people had put their money—but
the perception is that very little has
been done for common debtors.
It is a paradox that in the time of a
nominally left wing government that the
banks have been given new life. They
all collapsed, but now we basically have
the same banking system as before, ex-
cepting a fray of smaller financial insti-
tutions that have gone bust. Two of the
banks have changed their their names,
with one of them, the Landsbanki of Ic-
esave disrepute, even blatantly retain-
ing its tarnished name.
One of the demonstrators from Oc-
tober 4th said to me: "This government
of the left had the banks on their knees,
but then it decided to resurrect them."
WHO IS PROTESTING?
There is also a question of who was
protesting. Some even stated that this
was a revolt by the middle classes who
normally might vote for The Indepen-
dence Party, the party considered most
responsible for the crash. Many left
wing people, supporters of the gov-
ernment who took an active part in
the ‘pots and pans’ revolution, stayed
away this time. There were even claims
that the demonstrators had arrived in
their SUVs, filling all the parking places
downtown.
In the crowd that night a Nazi flag
was hoisted, along with different neo-
Nazi insignia, fuelling fears that the ex-
treme right might be on the rise in the
country. There was also a flag with the
image of Che Guevara to be seen, as
well as the black flags of anarchists.
Some of these people might have a dif-
ferent agenda, ranging from an aver-
sion to the IMF or the EU to general
dislike of capitalism.
THE dEfENSIVE SHIELd THAT
fAILEd
However, it can be claimed that the
demonstrators were quite normal
people, people who are fed up with the
incompetence and constant bickering
of politicians. It has been claimed that
of 150 people—many of them politi-
cians—interviewed the Special Investi-
gative Committee, not a single person
felt any responsibility for the collapse.
Most of these people can’t seem to wait
to get back to business as usual, while
the general public becomes more and
more frustrated by the aftershocks of
the collapse.
Surely the government’s task was
always going to be difficult, but at the
outset it announced that it would throw
a defensive shield around the homes
of Iceland. The term for this, "skjald-
borg", has become a byword for bro-
ken promises. It was also going to be
a government of Nordic welfare, after
many years of relentless neo-liberalist
policies. However, the government has
been extremely bad at communicating
with people and inspiring then. Trust in
Alþingi, the Icelandic parliament, is al-
most non-existent. Few people lament
that it was pelted with eggs and rotten
vegetables on Monday the 4th of Octo-
ber.
AN uNGOVERNABLE COuNTRy?
This all leads to a serious political vacu-
um. Not many people seem to want the
old government back. One prominent
politician from the Independence Party
got hassled during the demonstrations
and had to be rescued by the police. In
September, Parliament decided—after
recommendations from the aforemen-
tioned parliamentary committee—to
prosecute ex-PM Geir Haarde before a
special court, never before convened.
This created an outcry amongst Geir
Haarde's supporters, but it was evident
that no one on Austurvöllur was dem-
onstrating on his part.
It could be surmised that Iceland
is essentially ungovernable at the mo-
ment. Debate is unusually vicious and
uncompromising, as can be witnessed
on local blogs. Foreigners who come
here see a country with nice houses,
cars and shops. The crisis is not evident
when you move about Reykjavík. But
underneath there lies a kind of mal-
aise that is eating up our social capital.
The feeling is almost that the country
is ungovernable. A recent compara-
tive study shows that trust in Iceland is
on the level of—no, not Sweden or the
other neighbouring countries—but Ven-
ezuela.
BRAIN dRAIN
There are calls for a government of all
parties, or a government of specialists
appointed by the President. But then
one wonders whether such govern-
ments would have the clout to deal with
the powerful interest groups that the
current government has been so afraid
to take on: The banks, who seem to be
back to their old secretive ways, writing
off the debts of the extremely rich while
persecuting the small debtors; the very
powerful owners of fishing quotas; the
farming lobby and the bosses of the
pension funds.
We have a nation that might have
thought that the economic collapse
was an abstract that wouldn’t affect
people in any real way—but now it does.
The crisis—in Icelandic "the kreppa"—
will be a long-winded affair. One of the
serious dangers with debt, budget cuts,
unemployment and general discon-
tent is that young people will leave the
country in herds. Iceland has very many
square kilometres, but the population is
small—a brain drain is the last thing we
need, but just next door, we have afflu-
ent Norway...
Words
Egill Helgason
Illustrations
Lóa Hjálmtýsdóttir
THE fAILuRE Of ICELANdIC POLITICS
or is Iceland essentially ungovernable after its economic collapse?