In 2008 Iceland faced the worst financial crisis in its history as three leading banks defaulted under the weight of huge foreign debt. After four years, the banks are out of debt and fighting to rebuild its economy. Images taken in July 2011.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest was indicted in december, also the former CEO of Landsbanki Islands hf, Sigurjon Arnason.
At the time of the bank’s failure, 2008, Iceland refused to cover the losses. But the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.
In response, the Icelandic people have told Europe to go pound sand. The final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent. “Taxpayers should not be responsible for paying the debts of a private institution,” said Sigriur Andersen, a spokeswoman for the Advice group that opposed the bailout.
Nowaday Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, while the euro area will grow 0.2 percent this year. Analysts agree Iceland’s crisis approach is hardly applicable to the euro-zone countries as they can’t devalue the currency by themselves.
If that fervor catches on amongst taxpayers worldwide, as it has in Iceland and with the tea party movement in America, the banks would have something to fear; that is, the inability to draw from limitless amounts of funding from gullible government officials and central banks. It appears that the root cause is government guarantees, whether explicit or implicit, on risk-taking by the banks.
The lesson here is instructive across the pond, but it is a chilling one. If the U.S. — or any sovereign for that matter — attempts to restructure their debts, or to force private investors to take a haircut on their own foolish gambles, these international institutions have promised the equivalent of economic war in response. However, the alternative is for representative governments to sacrifice their independence to a cadre of faceless bankers who share no allegiance to any nation.