What's Next for Iceland: Ensuring a Fair Election in May

Icelandic Prime Minister Geir Haarde, leader of the Independence Party, announced at a press conference today that he was stepping down for health reasons and called for parliamentary elections on May 9th. Foreign Minister Ingibjorg Solrun Gisladottir, leader of the Social Democratic Alliance, which formed the other faction in the ruling coalition government, also stated that she favored spring elections.

Icelandic Prime Minister Geir Haarde and Foreign Minister Ingibjorg Solrun Gisladottir.
Photo credit: mbl.is/golli

This reversal of policy follows weeks of steadily escalating protests, capped by this week's violent clashes between protesters and riot police before the Althingi, Iceland's historic parliament. It also comes two days after the Social Democratic Alliance's Reykjavik chapter endorsed the protesters' calls for new elections, and one day before the Independence Party's scheduled meeting, which has been postponed until March.

Iceland's spectacular rise in prosperity came to a crashing halt three months ago, when the government was forced to take over its three major banks after credit on the international market dried up. The British government invoked anti-terrorist legislation to seize one bank's British operations, the Icelandic krona dropped more than 70%, and the Icelandic stock market lost over 80% of its value in less than a week. Massive layoffs have followed, and the International Monetary Fund (IMF) has been called in.

However, no one in the ruling political or financial elite has assumed responsibility for the crisis, and David Oddsson, the former Prime Minister who oversaw the privatization of the banks and who currently serves as governor of the Central Bank, has refused to step down or admit any fault. Rumors of widespread malfeasance at the banks in the weeks preceding the crash abound.

A poll this week indicated that there has been a strong shift away from the ruling coalition in favor of the Left Green Party and the Progressive Party, but a substantial percentage of Icelanders want a new government with no ties with any of the existing political parties.

Before we can make informed decisions in the upcoming elections, we need to know:

• What the banking regulators knew, and when they knew it
• Any monetary gifts given to the politicians and government bureaucrats by the banks and large companies
• The family ties between the elected officials, the banks, and the companies
• All suspicious loans, withdrawals, or transfers in the weeks preceding October 8, 2008 (the date that the first of the failed banks was nationalized)
• Why Landsbanki didn't have its IceSave accounts in England transformed into a UK subsidiary as the British government had requested (which made the Icelandic, rather than the British government, responsible for their losses and which led to the British government's invocation of anti-terrorist laws to shut down Landsbanki's UK operations)
• Whether the banks' assets were sold at a reasonable price and, if not, who made the decision to go ahead with the sales

The Icelandic media is largely owned and controlled by the same individuals suspected of participating in the widespread wrongdoing that led to our economy's collapse. We must ensure that this information reaches the public in a timely manner.

Unfortunately, the government and the banks have not taken any significant steps to investigate these matters, of if they have, they've done a very thorough job of keeping the information away from the public. The government last week appointed the sheriff from a rural town of 6,000 to investigate what is certainly a highly complex international financial scheme. Luxembourg bank secrecy law supposedly hinders government investigative committees' access to certain bank transactions that could reveal illegal money transfers, even though the government has nationalized the banks, and now owns and operates them. (Once the government assumed control of the bank, it stepped into the shoes of the bank officials, and is entitled, as the bank's owner and operator, to examine all customer accounts and to investigate any possible wrongdoing by its current and past employees.) Two weeks ago the government downsized the police's Economic Crimes Department.

Public sentiment against the Vietnam War in American began to shift when Daniel Ellsberg leaked the Pentagon Papers, and against Richard Nixon when Mark Felt leaked information to Woodward and Bernstein. Perhaps our own "Deep Throat" will come forward soon with the information we need, but I'm dubious.

Unless such a courageous soul steps forth, Icelandic voters can only assume that every elected official from either of the ruling parties was a participant in this massive fraud. The members of the opposition parties should have to explain why they didn't investigate the banking system despite all the warning signs over the past couple of years.

Any party seeking election must tell in detail the steps it would take to alleviate Iceland's suffering, how it would investigate and prosecute the crimes that led to the collapse, and the steps it would take to ensure the independence of our politicians and regulators in the future.

No one ever said democracy was easy, but we never imagined it would be so hard. Our only hope now is a peaceful transition from a corrupt plutocracy to the responsible liberal democracy we had fooled ourselves into believing we already had.

Although the odds are stacked against us, our recent uprising gives me hope that we will take our country back from this very small group of megalomaniacs, and that Icelanders' sense of justice and community will ultimately triumph over the greed that has characterized our politics for so long.

Protesters in downtown Reykjavik. Photo credit: Johannes G. Skulason

Read more on this subject:
Iceland - the Nordic Zimbabwe
"Crime Once Exposed has no Refuge but in Audacity"
Iceland is Burning
Iceland is Burning - Day 2

Comments

[David Bly]

Iris, Thanks for sharing your insight on the situation in Iceland it should be a good lesson for us, not to make the same mistakes here, although we've been doing exactly that. Our country is so big and our economy so large it is not as contained as the Iceland experience. Those who continue to advocate for these devastating economic policies escape the embarrassment that Icelandic politicians face. Parts of our country are just as bad. I had a friend who recently went to Detroit and said that unemployment there has reached 30%. That's higher than it was during the depression.

[5cats]

The Icelandic Financial Supervisory Administration, run by Jonas Fr Jonsson (who was fired on 25 January by former Minister of Trade Bjorgvin Sigurdsson) is currently being investigated by KPMG. Surely the FSA should, if independent, have blown the whistle on wrongdoings by the banks. The icelandic people will need to be told about the actions of the FSA and its links to the banks. Was the FSA and its Chairman really independent ?

[dogman44]

Calling in the IMF to help Iceland deal with their economic woes is akin to sending a bunch of
arsonists to put out a fire. After a few years of IMF policy Iceland will look like a frigid Ethiopia,
stripped of it's resources, people in rags.

[AliLiz]

Iceland...join the EU and use the euro. This is better than what you have. It will help your beautiful country.

[Johnagain]

"Although the odds are stacked against us, our recent uprising gives me hope that we will take our country back from this very small group of megalomaniacs, and that Icelanders' sense of justice and community will ultimately triumph over the greed that has characterized our politics for so long."

If only we could substitute 'Americans' for 'Icelanders' and have it be true. Alas, America has probably gone beyond the point of no return as far as reclaiming our country from the megalomaniacs.

[breakfast]

Viva la revolution.

[newmexicogold]

Hej Iris -

It may be that the birth of deregulation and root cause of the Iceland banking crisis was a lecture given by Milton Friedman in 1984. From Wikipedia: "Friedman made a great impact on a group of young intellectuals in the Independence Party, including Davíð Oddsson who became Prime Minister in 1991 and began a radical program of monetary and fiscal stabilization, privatization, tax rate reduction (e.g., lowering the corporate income tax rate from 45% to 18%), definition of exclusive use rights in fisheries, abolition of various government funds for aiding unprofitable enterprises and liberalization of currency transfers and capital markets."

Friedman's economic theories are now widely in practice worldwide. They may also be the cause, as he never factored for globalization. One of his disciples, Alan Greenspan, stated to Congress that he was also surprised that the market didn't practice self-health practices.

Financial markets and systems are not regulated, the people who run them are.

[newmexicogold]

Hej Iris -

I have been investigating the US bank liquidity issues for a year. There must be Icelandic gound involvement, since the records you seek will be located there. I can steer your group towards timelines, and clues in legislation.

Our own liquidity problems started in Dec. 2000. All members of Congress must file a financial disclosure report at the beginning of the year - this shows income earned the previous year. Campaign contributions are trickier to track, since a corporation can hand the money to emplyees with an order to donate to a campaign fund. Tracing the money takes time, but it always shows where the influence originates.

For starters, look for any involvement with UBS and any of it's subsidiaries. UBS is a Swiss bank, that not only has influenced US banking regulations, but is also implicated in hiding offshore accounts. Like Luxemburg, the Swiss have banking secrecy laws that are difficult to penetrate, and I would need to know more about Icelands banking laws.

I can tell you how the banking crisis blew up. Banks got involved in gambling. They issued 'insurance' on complex financial transactions, called credit default swaps. A CDS van be purchased by anyone, not just the participants in the transaction. Banks were not regulated for liquidity in backing these securities. Look for the authors of the regulations, since banking examiners never looked at those records. Pull the voting records back to Jan 2001, since these financial transactions started after that.

[pmag88]

From the article -------- "(Once the government assumed control of the bank, it stepped into the shoes of the bank officials, and is entitled, as the bank's owner and operator, to examine all customer accounts and to investigate any possible wrongdoing by its current and past employees.) Two weeks ago the government downsized the police's Economic Crimes Department." -----------

Sadly, it looks like hiding behind the government is the point, and it appears it may be happening here in the U.S as well. But at least you're people are rising to the occasion as one people, and working to suss out what actually happened. You are very brave indeed and I believe you will follow the money trail and will become an example for the world on how to take back, through just means, what was obviously stolen. And what can't be retrieved can certainly be rebuilt in a way that from this point forward, makes it safe for decent, honest, hardworking people, to trust in their government and their financial institutions again.

[HMDMSR]

Icelanders won't have to wait much longer before many countries join them at the bottom.

[lthuedk 1]

Welcome to the dump-the-fascist club. From Australia to America to Iceland, the human species has had enough new millennium nationalist socialism.

Privatization without regulation can and did lead to fascism, particularly with an entrenched military-industrial complex, as Pres. Eisenhower described. I hope Iceland follows the lead of the recovering democracies all over the globe and frees itself from it's own version of occupation.

http://www.light-to-dark.com/the_joy_of_a_dictatorship.html

[spaceknife]

I would love to apply to that "dump the faschist club" Canadian version if there was one because we are in great need of it these days in Canada too.

[Fabini]

Ms. Erlingsdottir, thank you for your articles, I read each one, please keep us informed. I think Iceland's difficulties are also the United States'. We must all get behind a government we trust. Good luck to us all.

[Kria]

I wish to warn those who care about Iceland and are alarmed by these blogs that they offer a very exaggerated and sensationalist view of what is happening. What nonsense to say "Iceland burning" when some youth start a bonfire. How preposterous to refer to "Our recent uprising", where a few hundred, at most a thousand gathered in protest and some thugs misbehaved themselves. This blogger has no knowledge that anyone or everyone in the government has been corrupt and in the meantime those public servants are being defamed. All these comparisons to Watergate etc are illogical and make no sense, they might however inspire some general feeling of intrigue, righteousness and daring journalism, which, alas, is not on display here.

[WestNebraskan]

The Icelandic site mbl.is reports that 5000 people showed up for the demonstration today in Reykjavik. Proportionately, this would be the equivalent of 5 million people in America. This doesn't look like a flash-in-the-pan to me.
If the government has nothing to hide, why hasn't it devoted any resources to investigating the banks' collapse? Why hasn't anyone resigned, for incompetence at least? Why are there so many people looking for change?

[Fabini]

Kria, are you from Iceland? Are you there now? I am most happy to hear different points of view. Thanks.

[skyfish]

Kria, I am looking at the above picture of the protests - the protesters sure don't look like "some thugs" - and are you suggesting that Icelandic news media are lying about what is going on in the country? Yesterday I saw on one of them that 6,000 had gathered to protest, peacefully, the story noted, in downtown Reykjavik.
As for "Iceland is burning" being "nonsense" - a fire was started in front of the parliament house - pictures of which were distributed all over the world - so ... "burning"... Looks also like Icelanders are "burning" with anger... When you look at Icelandic news sites, this seems to be the "burning" issue...
As for Watergate/Deep throat reference - what has the only way this information will get out is if someone within the government or the banks divulges it. (oh, and one of Iceland's "public servants" the Minister of Commerce, just resigned, saying he is one of those responsible for the collapse).

[vexenpexen]

excuse me but i am in iceland and what you say is untrue. only a thousand protesting? what a load of crap! i have been down at the saturday protest every single saturday, 16 saturdays in a row. most of the saturdays have had about 5000 protesters, yesterday there were more. every single day since tuesday a group of people stand in front of the parliament protesting. being that i am one of them i can tell you that most stop only for only a couple of hours. therefore it's easy to see that at least a thousand take turns during the day. on tuesday night there were est. about 2000 people downtown during the night. i was there, it was peaceful. even with the bonfire.

iceland is certainly burning. the people have taken to the streets in protest of what can only be called incompetence, corruption and severe nepotism. the handful of protesters who were violent have been stopped by other protesters. not the police. now every peaceful protester wears something orange to show that they will not endorse violence or damaging of property.

so before you start lying to the world press kría, you should realize that icelanders also read the huffington post. there is certainly a revolution in iceland and it is going to happen no matter how scared you are of it. i am a part of it and i have never been more proud of what i'm doing for myself and for my country.