Reykjavík Grapevine - 26.08.2011, Blaðsíða 12

MEDIEVAL MANUSCRIPTS – Eddas and Sagas
The ancient vellums on display.
MILLENNIUM – Icelandic art through the ages.
Phase one. Starts 23 June.
CHILD OF HOPE – Youth and Jón Sigurðsson
Tribute to the leader of the independence movement.
EXHIBITIONS - GUIDED TOURS
CAFETERIA - CULTURE SHOP
The Culture House – Þjóðmenningarhúsið
National Centre for Cultural Heritage
Hverfisgata 15 · 101 Reykjavík (City Centre)
Tel: 545 1400 · thjodmenning.is · kultur.is
Open daily between 11 am and 5 pm
Free guided tour of THE MEDIEVAL
MANUSCRIPTS weekdays at 3 pm,
except Wednesdays.
12
The Reykjavík Grapevine
Issue 13 — 2011
Iceland | Analysis
The political debate in
Iceland has gotten hor-
ribly stale and repetitive.
In some places Iceland is
held up as being a model of how
to survive an economic crises and
rebuild society. For most Iceland-
ers this seems totally wrong. Some
politicians, including our President,
like to flaunt this view when they go
abroad, but this is definitely not the
feeling in Iceland.
A GREAT TRANSFER OF WEALTH
The situation almost three years after
the crash of 2008 is thus: Much of the
debts of the Icelandic banks were writ-
ten off, there was no other choice, as
the total debt was ten times the GDP.
There was no other way out—this was
not due to any wisdom on part of the
nation’s leaders. The bank system has
been resurrected, mainly on the back
of the population—it is the common
people who carry the load. There has
been a huge transfer of wealth from the
general public to the banks, the pen-
sion funds and the owners of capital.
According to the latest figures, lending
institutions used to own a stake in 30
percent of the private housing in the
early 2000s—now they own more than
50 percent.
Thus, the people of Iceland are
heavily indebted—they keep paying off
their mortgages, but they own less and
less. Inflation has also been rampant
and real wages have collapsed. Iceland
is now lagging far behind its Scandi-
navian neighbours. There is a steady
stream of emigrants, especially to oil
rich Norway—which nobody can com-
pete with. Icelanders who go to school
abroad do not return home after their
studies.
The reckoning after the collapse still
goes on, but it is slow and muddled,
creating more frustration than relief. A
thorough study by a special committee
that was published in April 2010, call-
ing for openness and reckoning, seems
almost forgotten. A special prosecutor
who was nominated after the collapse
is researching many cases, but almost
none of them have gone to court, ex-
cept one, where a judge ruled that the
culprits had admittedly swindled their
banking institution, but that their crimi-
nal intent could not be proven.
WHY ICELAND IS NOT A MODEL
In two rather famous instances, Ice-
land has shown the finger to the world
of finance and many feel proud of this.
This is possibly the reason the Icelan-
dic flag is flown in demonstrations in
the Puerta del Sol in Madrid. These are
the two referendums on the so-called
Icesave repayments, purportedly owed
to the British and the Dutch. But ulti-
mately this might turn out to be more
symbolic than real, there is still a possi-
bility that Iceland might lose an interna-
tional court case over this, but it seems
that the assets of the fallen Landsbanki
might cover most of the Icesave claims.
Perhaps the threat of Icesave to the
economy was overstated.
But there is still the myth that Ice-
land did not bail out its banks. This is
not entirely true. According to an OECD
report Iceland has put more money into
its failed financial institutions than any
other country except Ireland. So in this
way Iceland is not a model—the people
in Spain need not wave Icelandic flags.
THE PUBLIC PAYS
We now have a left wing government—
elected in the wake of great protests in
early 2009—which muddles on, largely
following the agenda of the Interna-
tional Monetary Fund. But its situation
is rather confusing. At the outset it
claimed that it would protect our ‘Nor-
dic’ welfare system, but it has had to
make big cuts in health care. The plan
had called for a balanced budget this
year, but this will not be the case, so
further cuts are needed and there will
also be tax increases.
Investment has been almost non-
existent since the collapse. The Icelan-
dic króna, which plummeted to half of
its previous value, is still very weak—it
is now kept afloat by stringent currency
restrictions. This of course means that
Iceland gets more revenue from its
fish exports and the burgeoning tour-
ist industry—in order to pay its debts—
but here again the people are paying
through lower wages, as well as food
and consumer goods that keep getting
more expensive. Because of the inher-
ent instability of the króna, interest
rates are very high, they were recently
raised to 4,5 percent—in an economic
system where GDP has fallen consider-
ably and where only 1,6 percent growth
is predicted. No wonder many feel that
the króna is a doomed currency.
THE GOVERNMENT THAT CANNOT
DIE
The parties in government are wed-
ded to stick together. This is nominally
the most left wing government in the
country’s history, and if the govern-
ment falls there probably won’t be an-
other chance for the Social Democrats
and the Left Greens to rule together.
But the parties are in disagreement
on many matters. Three members of
parliament from the Left Greens have
actually deserted—leaving the govern-
ment with the narrowest of majorities.
This means that individual MPs, such
as Jón Bjarnason, Minister of Fisheries
and Agriculture, can take the govern-
ment and its agenda hostage. Jón has
actively undermined Iceland’s negotia-
tions with the EU, much to the dismay
of the Social Democrats. Many think
that this cannot continue through the
winter, that the gov-
ernment has little hope
of surviving. But then again
it has suffered so many blows and
beatings that some say it cannot die;
that it is trudging onwards like some
sort of Zombie Government.
When the government was formed
two and an half years ago, the Social
Democrats—the party of Prime Minis-
ter Jóhanna Sigurðardóttir—managed
to convince the Left Greens to send an
application to join the European Union.
Most of the leaders of the Left Greens
are against joining the EU, but they
agreed on the premise that the case
would be settled once and for all in a
democratic manner. There would be an
agreement that would be put before the
nation in a referendum.
CALLS FOR TERMINATING NEGO-
TIATIONS WITH THE EU
Since then matters have become more
confusing. The negotiations with the
EU might be finished late next year.
But support for joining the EU has
been waning. Of course the EU is in
trouble with the Euro, the future of the
union is quite unsure, and those who
simply wish to terminate the negotia-
tions are getting more and more vocal.
There has been strong opposi-
tion from a group around former PM
Davíð Oddsson, which basically de-
tests the EU and all it stands for. They
have managed to form an alliance with
people from the left, many of them
members or former members of the
Left Greens. Up to now, the leaders
of the main opposition parties have
been rather reticent, but recently Bjarni
Benediktsson, leader of the large Inde-
pendence Party, called for the nego-
tiations to be stopped. Soon after Sig-
mundur Davíð Gunnlaugsson, leader
of the Progressive Party, followed suit.
It seems clear that if the government
were to fall, the application would be
withdrawn.
Politics in Iceland are in disarray.
Jóhanna Sigurðardóttir, the Prime Min-
ister, has completely lost her popular-
ity. The strong man of the government,
finance minister Steingrímur J. Sigfús-
son, seems tired and unconvincing.
He is having great problems keeping
his party together. Both face electoral
defeat. But they have one consolation:
The opposition is just as unpopular as
the government. According to a new
poll, only 33 percent of the voters trust
the leaders of the opposition.
Words
Egill Helgason
Illustration
Lóa Hjálmtýsdóttir
Egill Helgason is a journalist, political commentator, blogger and the host of
Iceland's only literary TV show, as well as Iceland's premiere political talk show.
How he has time to write articles for us, we do not know. But he does.
“According to an OECD report Iceland has put more money
into its failed financial institutions than any other country
except Ireland. So in this way Iceland is not a model—the
people in Spain need not wave Icelandic f lags”
ZOMBIE POLITICS
Continues on page 25