The whole matter of the financial crisis (kreppa in Icelandic) and the collapse of the three biggest Icelandic banks – at the time of the collapse, privately owned – is a complex one, and there are many sources you can refer to to try to have a clearer idea of the situation (I linked some at the end of this post).
I’m really your average simpleton that never studied economics and uninterested in financial speculations, so from the very beginning I have had this clear, simplistic idea that what happened here is what happened everywhere else in the 2008 financial crisis: the “discovery” that actions of a minority with money and power can endanger the future of millions of people. And when something goes wrong, those who have to pay for the actions of that minority are those millions of people, the tax payers, those who actually have to work each month, at least 5 days a week, to pay their bills. When this happens in a country with millions of tax payers, this iniquity is ignored by most, but when this happens in a country with just 300,000 inhabitants, it means disaster.
The problem, in Iceland, is that the population is incredibly small in comparison to the investments and speculations of the financial sector – so the result of the crash, and in particular of the Icesave dispute, is that Icelanders have to repay Britain and the Netherlands something like 3.8bn euros (plus interests), spent by the governments of these countries to refund the investors who had put their money into the Icesave fund. This means, basically, that every Icelander – every man, woman, and children – should pay something like 13,000 euros over the next years. The way Britain and the Netherlands behaved at the time of the crash also complicated matters further. Both countries bailed out their savers voluntarily and then asked Iceland to pay (with interests); Britain notoriously used anti-terrorist laws to freeze all assets of Landsbanki within UK.
Today, Icelanders had to vote in a referendum (again, the process that lead to the referendum is a complex one that seems to have torn apart the current majority in the parliament) regarding a possible agreement to pay the Icesave claims to Britain and the Netherlands. Well, as many were expecting, more than 90% of Icelanders voted no today. The outcome of the referendum has always been obvious , but the percentages show that the public opinion has become more and more compact over the past weeks.
The referendum had little practical meaning, because new negotiations with Britain and the Netherlands have already started weeks ago, but it still has a strong political value that goes well beyond the boundaries of this country. They say that “every country has the government it deserves”; coming from a country where a person like Silvio Berlusconi was able to hold the power for nearly 15 years, regardless of conflicts of interest and controversies that would have forced him to resign in any other democratic country in the world, I find it hard to reject this idea. So, yes, of course Icelandic voters are responsible for the actions of those who had and have the power in the country. Yet, truth is that all of us, the population living in the rich area of the globe but outside the circles that have the power, are kept in a state of ignorance. That is why I think that what happened in Iceland is extremely important. When the kreppa hit Iceland, we had a glimpse of what is often hidden from our view: the way the global economic system works, even in more clear light than what we could see in the stock market crash that preceded and triggered the kreppa. What happened in Iceland lead to something that for simpletons like me or you could be closer to a revelation than to a discovery, something that was given to us thanks to a series of coincidences that could have occurred only here, a country with the financial sector of a big country but the anomaly of a small population. In Iceland, it is like the global capitalistic system entered into a sack that was too small to contain it, leading to an explosion that uncovered mechanisms that are usually meant to be hidden from simpletons.
As few observers pointed out, the referendum in Iceland and the consequences of the Icesave deal might cause a chain reaction in countries facing crises similar to Iceland’s. Sadly, I believe that the global economic system will work to make people forget about this crisis, if possible. But to those who have eyes to see, what is happening in Iceland should serve as a wake up call to vote with more responsibility and to try to dig deeper into the news we are spoonfed by mainstream mass media.
Meanwhile, let me express my support to the hard-working, warm-hearted Icelandic people, that had a small celebration in downtown Reykjavik after the results of the referendum were made public. And yeah, I would have voted too, and I would have voted no.
Some links to make your own opinion on the subject are the Iceland Weather Report, Iceland Review, Grapevine.is (all linked in the side menu), but also the Wikipedia article on the crisis, and the good BBC.co.uk FAQ on the referendum.
Your comments on the financial situation interesting. Simple truth is that Iceland spent more money than was coming in (taxes etc.) and now they are being asked to pay up. My comment seem somewhat simple and I truly have compassion for the average Icelancer caught up in this mess caused by excessive spending but the country has been living on financial borrowed time and excessive debt, By the way, so has my country. Dar Isensee, Lake Oswego Oregon USA
Thanks a lot for your comments and e-mail Dar Isensee. Yes, I agree with you. Not only big companies, but also normal people fueled the high expenses of the country, which were made also on borrowed money. This said, as the Black Report shows, problem #1 in the country was also lack of sufficient information and coverage from the media, caused by deeply rooted ties between some media companies and the financial sector. Everything here is (was?) built upon mutual trust. Icelanders believed their media, their bankers, and their financial advisors (see stats about perception of corruption in Iceland before the crisis); most of the people in the country had no idea of the disaster that was soon to come, simply because they believed in those that were supposed to manage and guarantee the solidity of the financial sector, and they believed in the media.
Of course, everybody, in the end, is always partially responsible for his or her own choices. Naivete is no longer acceptable once you have entered and fully adhered – also with your spending behavior – to the rules of the global market.