Reykjavík Grapevine - 13.04.2012, Side 14

14
The Reykjavík Grapevine
Issue 4 — 2012
Iceland was recently described as a
success story of the economic cri-
sis in a Financial Times article. Just
free from under the International
Monetary Fund’s wing, Iceland was
considered an interesting experi-
ment in getting out of a crisis of this
kind, moving quickly from a bubble
economy based on finance to an
economy based on real things. The
article noted that Iceland had al-
lowed the banks to fail, the coun-
try’s debts had been reduced to a
manageable 65 percent of GDp,
and government bonds had been
moved from trash to investment
rating. With growth reaching 2,5
percent for this year, Iceland’s fu-
ture seemed quite bright.
The Financial Times article called Har-
pa—the new conference centre and
concert hall on the Reykjavík harbour
front—a symbol of Iceland’s recovery.
Building such a house in a city with less
than 200 thousand inhabitants could be
considered a megalomaniac folly—and
surely construction started during the
boom years, when Icelanders were in
the grasp of what has been called col-
lective madness—but since its opening
in May last year, it has been a great
success.
A VERY UNpOpULAR
GOVERNMENT
It could be considered a paradox that
the government—a coalition between
the Social Democrats and the Left-
Green Movement, which came to pow-
er shortly after the crash—has not been
reaping the benefits of the country’s
recovery. Quite the opposite; its confi-
dence rating now rests at 28 percent,
making it the second most unpopular
government in Iceland’s history, right
behind the government that was in
power during the crash. It must be not-
ed that a while before the collapse the
government’s approval rating was 83
percent. It is now common knowledge
that at that time, in 2007, the economy
was totally out of control, resulting in
the collapse of all the banks in October
2008.
Prime Minister Jóhanna Sig-
urðardóttir of the Social Democrats
and Left-Green Party Chair Steingrímur
J. Sigfússon are deeply unpopular poli-
ticians, who are often talked about in a
hateful manner.
One of their problems is that they
are not very good at communicating
their policies, though they themselves
would say that they are too busy clean-
ing up the mess. Another problem is
the supreme propaganda flair of the
opposition, The Independence Party,
which has dominated Iceland’s politi-
cal history. This party, which is a broad
right-wing alliance, was in power for
eighteen consecutive years leading up
to the crash. It enjoys a lot of support
in the business, fishing and industrial
sectors and is able to inflict serious
harm on a government it does not like.
A LIST OF FAILURES
Still, there are also a number of failures
that can be put squarely on the door-
step of Jóhanna Sigurðardóttir and
Steingrímur J. Sigfússon. One is house-
hold debts, which rose steeply after the
crash and the collapse of the króna.
Unfortunately, the government’s solu-
tions have been found to be seriously
lacking—despite Jóhanna promising to
build a protective fortress around the
homes in the country. This has caused
large demonstrations in the city centre,
and will likely be a big issue in the up-
coming elections, set for April 2013.
Another is Icesave, a deal with the
UK and the Netherlands on how to re-
pay money deposited into savings ac-
counts that the Icelandic bank Lands-
banki operated in the two countries
before the crash. This has been a se-
rious international dispute for Iceland,
and a deal has been reached twice,
both times supported by the govern-
ment and narrowly passed in Parlia-
ment, and both times—in early 2010
and 2011—vetoed by President Ólafur
Ragnar Grímsson and put to a general
referendum where the government got
duly thrashed. These are blows—which
caused them to lose a lot of support-
ers—from which Jóhanna and Stein-
grímur will never recover.
There are other big issues caus-
ing serious friction. As the Euro crisis
deepens, an application to join the EU
has become deeply unpopular; a pro-
cess of rewriting the Constitution has
met with filibustering in Parliament;
and, not least, the government has
opened a real Pandora's Box in the
process of trying to reform the fishing
quota system, an issue which tends
to make everybody in Iceland hopping
mad with anger.
Some might say that the govern-
ment was too ambitious for its own
good at the outset. It took over when
everything was in disarray, now it has a
very hard time living up to its promises.
DEVALUATION OF THE KRóNA
Nonetheless, there has been a recov-
ery, which even the opposition has had
a hard time denying; it actually uses
this recovery as an argument against
joining the EU. Unemployment has
not risen to figures seen elsewhere in
Europe, the welfare state has mostly
been protected, and Iceland seems to
be better off at the moment than other
countries which suffered such eco-
nomic shocks—Ireland, Greece, and
Latvia.
Of course this is somewhat due to
the devaluation of the króna, down
from less than 90 krónur to the euro to
168 to the euro now. One of the reasons
for the crash was a totally overvalued
currency, but now when the króna is
down on the skids, it is helping the ex-
port industries—mainly fish and alumin-
ium—and tourism is blooming like never
before. There is a sizable trade surplus
to pay the country’s debts, which is a
great change from the times before the
crash when deficits rose to twenty per-
cent of GNP.
In Iceland, however, there is a dif-
ferent perception. The króna has in a
way been both the sickness and the
remedy. The collapse of the currency
put a heavy burden of debt on the back
of the population, both in the form of
loans in foreign denomination—which
were a kind of a craze before the
crash—and loans indexed to inflation—a
system that has been called madness
by prominent foreign economists. Infla-
tion is now 6,8 percent, the highest in
Europe, and whenever inflation goes
up, the loans become more expensive.
The value of the króna is now
propped up by strong currency re-
strictions. One euro is worth about
168 krónur, but on an offshore mar-
ket you get up to 250 krónur for one
euro. Those who are most vehemently
against joining the EU see the króna as
a prerequisite for Iceland’s sovereignty,
but even so, export industries—includ-
ing the fishing industry, which is anti-
EU in Iceland—have increasingly been
in favour of switching to the euro.
To adopt the euro, Iceland would
have to join the EU which, despite the
application to join, seems a distant
possibility. Other ways have been men-
tioned, for example adopting the Nor-
wegian krona—the Norwegians do not
seem to be thrilled—or the Canadian
"loonie"—the Canadians have been
rather polite about this.
FROM A HOLE IN THE GROUND TO
A FULL HOUSE
Perhaps Harpa is after all very much a
symbol of the recovery. It was originally
going to be built by the oligarch Björgól-
fur Guðmundsson of Landsbanki bank.
Then he and his bank and everything
around him collapsed. In 2008 we had
a big, ugly hole in the ground, which
stayed that way for a while. Many said
it should remain a hole in the ground as
a reminder of the crash, but in the end
the house was built. The state and the
city adopted the project and put a lot
of money into it. That was not uniformly
popular.
But it has been a success. People
seem to like the architecture and artist
Ólafur Elíasson’s huge glass façade. It
is a nice experience seeing the house
from different angles. The acoustics are
also very good. The building gives Reyk-
javík the feeling of a big city, making it a
great meeting place. And people flock
to the concerts. The Icelandic Sym-
phony Orchestra—a surprisingly good
one—came from an old concert hall that
seated 800 people and seldom sold out.
Now it fills Harpa’s largest concert hall
almost every time it plays, which means
that attendance has about doubled.
Björk did a series of concerts in the
house, and local favourites like Páll
Óskar and Helgi Björnsson have per-
ormed to full houses. There have also
been foreign artist such as conductor
Gustavo Dudamel, tenor singer Jonas
Kaufmann, soprano Kiri Te Kanawa,
John Grant and Yoko Ono—and among
those who are expected in the next
months are piano virtuoso Arcadi Volo-
dos, Elvis Costello, James Taylor, Bryan
Ferry and Tony Bennett. Even Iceland´s
most celebrated marching brass band,
called The Swans, has played in the
house two years in a row.
It is nearly always full. Who knows if
it will last, but the period after the crash
has actually been quite good for culture
in Iceland.
Iceland | Analysis
HARpA AS A SYMBOL OF ICELAND’S RECOVERY
“The value of the króna is now propped up
by strong currency restrictions. One euro is
worth about 168 krónur, but on an offshore
market you get up to 250 krónur for one euro.”
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.