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Personal view: financial crisis in Iceland
The
Iceland's credit crunch
Global financial crises is taking its
debt bit by bit. Iceland happened to be the very first country litteraly broughted
down by credit crunch. Resignations, protests and teargas are just the part of
this event that attracted atention
By PALL BALDURSON
from
Reykjavik, ICELAND
Since early october Iceland's economy has
been spiralling downward in what seems like a free falling nightmare that will
take no end. Families are bankrupt, companies are collapsing, people are starving.
Why did this happen? Is it the fault of world recession or are Icelanders responsible
for most of their problems?
Looking back on past events it might be said
that it´s a little bit of both. On the one hand many people spent excessively
on unnecessary items like SUV's and such, but on the other the government could
be blamed for ignoring many warnings about the expansion of Iceland's banking
system. Additionally others factors like bad management by the central bank and
general world banking crisis could also be to blame.
The curtains came
crashing down around the end of september/early october when in a period of ten
days Iceland's three big banks collapsed and its government saw no choice but
to take them over. A lot of people lost their savings and other governments made
demands about being paid back what their citizens had lost due to the banks adventure
in countries such as the Netherlands and the U.K. This has also included a domino
effect due to companies going bankrupt one after another. The government felt
obligated to take out a loan from the IMF and to seek financial help from Russia
which didn´t come in the end. However, they got financial help from Scandinavia
and Poland.
Icelanders and disorder
Still this wasn´t enough
to calm people down. Outdoor meetings were being held in front of the parliament
building every Saturday(when, ironically, the parliament didn´t have a session).
Eventually, the people´s frustration grew and in january people gathered in big
numbers in front of the parliament after having been given no answers about what
the government wanted to do to solve this situation.
Unfortunately it
involved some violence by both a certain number of protesters and the police.
People set fires and threw rocks at riot police and the police felt forced to
use tear gas and pepper spray to keep the crowd at bay. This had little effect
on the government´s effort to reach out the people although Iceland's Prime Minister
was shaken when his car was ambushed by a crowd.
New coalition and
new elections
Change only came when the independence party´s (many
of its adherents are influenced by Thatcherism in 1980´s Britain) coalition partner,
the social democrats, made certain demands to keep the coalition going. Among
them was that the head of the central bank should be removed from his post, which
was difficult for the Independence Party to do, since he was chairman for their
party for a long time and the country´s longest serving Prime Minister (from 1991-2004),
so he held a special status for many members of the party, while many people claim
that he is not fit for his post which should have rather gone to someone with
a higher education in economy.
Thus, since the Independence Party couldn´t
accept these terms, the coalition ended and a temporary minority government was
formed with members from left-green party and the social democrats with the backing
from the progressive party. Their government was formed on Sunday february 1st,
with 4 ministry posts from each party and two posts went to independent entities
including a Yale graduate economy dosent from the University of Iceland (which
had formerly tried to indicate the dangers of banking hyperactivity). It´s headed
by Jóhanna Sigurðardóttir which was formely a minister of social affairs and on
their agenda are swift reconciliation with the icelandic public and EU referendum.
New elections will be held on the 25th of april.
(Published:
10.02.2009.)
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