Reykjavík Grapevine - 04.02.2011, Blaðsíða 28

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The Reykjavík Grapevine
Issue 2 — 2011 Egill Helgason is a man of many talents, in case you were wonder-
ing. 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!
In October 2008, on the eve
of the economic crash, then
Prime Minister Geir Haarde
appeared on television and
gave a speech to the nation, closing
with the words: “God bless Iceland!”
The phrase stuck. The nation collec-
tively thought: what terrible mess have
we gotten ourselves into? This year,
Haarde will appear before a special
court, never before convened in the
history of the Iceland, to answer for
charges of gross negligence.
Two years later, the crisis ("kreppa"
in Icelandic) is bottoming out. Unem-
ployment is at a record high, produc-
tion is considerably down, and there
is great discontentment within soci-
ety; politicians and institutions are not
trusted at all. One of the greatest wor-
ries is emigration—the next-door neigh-
bour to Iceland is Norway, and there is
a steady stream of doctors, technicians,
nurses and workers moving across the
North Atlantic.
conFiScaTed pRivaTe jeTS
This is very different from the boom
years when the Icelandic currency
was totally overvalued, foreign money
flowed into the economy through the
banks, and financiers bought up shop-
ping chains and airlines abroad, flaunt-
ing their wealth in private jets and
yachts. The jets do not fly into Reykja-
vík airport any more. They have all been
sold or confiscated.
These financiers, often referred to
as modern day Vikings, have been os-
tracized. Most of them now live abroad,
and in any event they are thoroughly
despised and would not be welcome in
a group of their countrymen. Many are
under investigation by a Special Pros-
ecutor who is investigating the crash—it
is likely that some of them will end up
in prison. Among those who have been
interrogated are bank directors such
as Sigurður Einarsson and Hreiðar Már
Sigurðsson of Kaupthing and tycoon
Jón Ásgeir Jóhannesson of now-bank-
rupt retail empire Baugur.
FRoM holy johanna To lady
GaGa
There are some peculiarities in the way
Iceland is handling its crisis. One rea-
son might be pure luck. At the time of
the crash, the government employed
emergency legislation to disentangle
itself from the collapsing banks’ for-
eign commitments. Well, Iceland could
never have repaid this kind of money—
which maybe adds up to ten times the
nation’s GDP—and admittedly, Geir
Haarde's government tried desperately
to secure funding from abroad in the
months leading up to the crash in or-
der to prop up the banks. But nobody
wanted to lend to Iceland, which was
already considered a basketcase. This
turn of events now sees Iceland in a
different position to Ireland, where the
government assumed responsibility for
the banks’ debts. The Icelandic govern-
ment’s failure to secure funds and prop
up the banks, and its refusal to honour
their commitments, might wind up se-
curing the nation a speedier recovery.
However, the economy is still in dire
straits. Iceland is now working within
the framework of an agreement with
the IMF. The debt situation is crip-
pling for the government, for private
enterprise and for many households.
There are strict currency restrictions,
and even though the present left-wing
government refers to itself as ‘a govern-
ment of Nordic welfare policies’, it has
been forced to considerably cut bud-
gets for healthcare, social affairs and
education.
In a political climate like this, no
government can expect to be popular.
Unexpectedly, political veteran and so-
cial democrat Jóhanna Sigurðardóttir
became Prime Minister in 2009, mainly
due to her reputation for being incor-
ruptible and for being a friend of the
needy and poor. Her nickname at the
time was ‘Holy Johanna’, but now things
have changed and in the current vi-
cious atmosphere she is often referred
to as ‘Lady Gaga’, due to her head of
white hair. The main source of discon-
tent is the household debt, which shot
through the roof when the króna col-
lapsed along with the banks.
The Second Fiddle STandS
TRial
In March of 2009, French/Norwegian
prosecutor Eva Joly stepped into this
atmosphere of mistrust. She was in Ice-
land to do a television interview on how
to deal with financial crime. A few days
later, due to public pressure, she was
appointed advisor to the office of the
Special Prosecutor. Almost overnight,
Joly, with her knowledge and gravitas,
became a national hero—her moral au-
thority was unequalled. It is mostly due
to her efforts that the Special Prosecu-
tor now has a staff of ninety people in-
vestigating the banks’ financial misdo-
ings—but Joly has left and stands to run
for president of France in 2012.
A Special Investigative Committee
appointed by Alþingi published a 2.600
page report on the collapse early last
year. The report describes fraudulent
practices by the banks, and a failure
of politics and governance. It is on the
basis of this report that former PM Geir
Haarde will stand trial. But while Alþingi
condemned the political practices that
led to the crash, it also descended into
party bickering that resulted in a group
of ex-ministers escaping prosecution at
the last moment. Geir will thus have to
face charges alone.
Some might consider this unfair, as
Haarde always played second fiddle to
his predecessor Davíð Oddsson, Ice-
land’s Prime Minister from 1991–2004.
Indeed, it was Davíð who created the
system that failed, a system he kept
on managing as a director of Iceland’s
Central Bank, where he was positioned
after pushing through his agenda of
privatisation and deregulation as PM.
Geir Haarde is a modest man who
seems to have lost his nerve in office
whereas Davíð is ruthless, intelligent
and unrepentant. Geir has mostly dis-
appeared from view, while Davíð refus-
es to leave the stage—after he was fired
from the Central Bank he assumed po-
sition as chief editor of daily newspaper
Morgunblaðið, where he scorns his op-
ponents on a daily basis.
a naTionaliSTic Folk heRo?
Another issue that complicates mat-
ters is Iceland’s application to join the
EU. The motion to apply was narrowly
passed by Alþingi, and the whole pro-
cess is very tentative, with polls show-
ing a sizable majority against joining.
Many Icelanders feel betrayed by their
neighbouring countries— especially
Britain, whose government used ter-
rorist legislation to freeze the assets
of Icelandic banks—and by Iceland’s
traditional allies in Scandinavia, who
have been pressuring Icelanders to pay
a huge debt incurred through Lands-
bankinn’s Icesave accounts.
Therefore nationalism has become
rampant, and the person at its forefront
is Iceland’s president, Ólafur Ragnar
Grímsson. Traditionally, the role of the
president has been a symbolic one, but
Ólafur Ragnar has changed that, veto-
ing bills passed by parliament and trav-
elling around the world embarrassing
the government with his utterances.
Ólafur Ragnar is a consummate po-
litical acrobat. He started out as a so-
cialist, during the time of the boom he
was perceived as a shameless cheer-
leader for the business Vikings, but
now, through his stance on national
debt, he has managed to restore his
reputation and is even considered a
folk hero by some.
hiGh hopeS—TanGible anGeR
There has been a radicalization of poli-
tics, starting with the so-called ‘Pots
and pans revolution’ of January 2009.
Passionate mass meetings were staged
in the aftermath and the blogs teemed
with ideas about the new and improved
Iceland that might be built on the ru-
ins. That atmosphere begat Novem-
ber’s elections for representatives in
a Constitutional Assembly, which was
scheduled to convene this February.
The elections were sadly declared null
and void recently by the High Court, a
bastion of conformism, solely due to
technicalities.
Demonstrations returned with a
second wave last October. It was an al-
together different affair: the mood was
much gloomier, there was little opti-
mism and more tangible anger. The big
grievance regarded spiralling house-
hold debts, and the feeling that in the
end business and finance will prevail
while the general public will be trapped
for years to come. The political atmo-
sphere has turned nasty. Old elites and
interest groups that were subdued af-
ter the collapse have found their voices
again. Parties are back at their old bick-
ering. The blogs are ill tempered.
an aMbiTiouS aGenda
Nobody has very high hopes for the
government of Jóhanna Sigurðardót-
tir. It still has to be admitted that its
agenda is an ambitious one. They are
not only struggling to restore the na-
tion’s economy and financial systems,
but also negotiating with the EU, re-
writing the constitution, restructuring
the civil service, all the while pushing
for the redistribution of fishing quotas
from the extremely powerful group of
vessel owners—a huge issue in Iceland.
But the coalition government of the
Social Democrats and the Left-Greens
constantly has to deal with revolt within
its own parties. One of the reasons it
has not yet fallen is that the opposition
doesn’t really wish to take over. With-
in the political class there is also fear
that we might be in for a repeat per-
formance from the Reykjavík municipal
elections, where a party of comedians
gained 40% of the vote and took over
city council.
The strong man of the govern-
ment is Finance Minister Steingrímur
J. Sigfússon, who was never invited
to govern during the boom years. He
and his party, the Left Greens, were
always on the sidelines, criticizing the
excesses of the prevailing free market
ideology. Now Steingrímur is finally in
government. He has to try to clean up
the mess. But then he is adhering to
the IMF’s program, so many people in
his party feel that he has betrayed their
cause. Working to resurrect capitalism
is probably not what this socialist son of
a farmer envisaged himself doing dur-
ing his long years in opposition, when
few heeded his warnings that Iceland
had lost its way.
analysis | Egill Helgason
words
Egill Helgason
illustration
Lóa Hjálmtýsdóttir
another year has passed: where are we now?
“Therefore nationalism
has become rampant,
and the person at its
forefront is Iceland’s
president, Ólafur Ragnar
Grímsson.”