Lunch Magazine Exclusive
Iceland’s former Prime Minister is in court on charges of negligence for failing to put financial safeguards in place ahead of the 2008 crisis, which saw the country’s three main banks fall.
Meantime Iceland’s President Olafur Grimsson ruffled feathers in Europe when he refused to commit taxpayers money to bail out its banks. Instead, he held two referenda, allowing Icelanders to vote against the bailout, allowing the banks to fail.
Some Icelanders are so pleased with the way their President handled the crisis, they’ve successfully petitioned him to run for an unusual fifth term in office.
I sit down with President Grimsson, and locals to hear about the current state of Iceland’s economy and political affairs.
On a crisp, cold, sunny winter’s day, I meet President Grimsson at his official residence just outside Rejkjavik. With minimal security, I’m led into the President’s library where we being talking about his controversial handling of the banking collapse three years ago.
“There was a strong public will in Iceland requesting that I should put the matter to a referendum, but even a majority of the people were against my decision. What was more important was that every government in Europe was against my decision. When I took the decision, it was in no way a kind of easy choice.
"I had to choose in a very fundamental way between the principle of the financial markets and the democratic premise of our society. It’s very rare in history that you are faced with this stark choice. Many were predicting that Iceland would become isolated in the European markets. All these predictions of failure turned out to be false.”
It's true. Despite dire warnings of soup kitchens and debt downgrades the ratings agency Fitch recently upgraded Iceland's debt to investment grade.
The US in contrast has had its debt downgraded and has around 50 million on food stamps despite bailouts in the trillions.
But locals like Siggi Skeltesson, who wait in line to get into Rejkjavik’s flea market, one of the few affordable places to shop, tell a different story about Iceland’s recovery.
“Most of the people are already finished with their savings. In Iceland, if you have a job, you have to work a lot of hours to make ends meet. Me, I work about 14 hours a day. I work for a car dealer, and in the evening, I work in a restaurant. We have to do it to make everything meet. It wasn’t like that four years ago. I only worked 8-9 hours four years ago.”
President Grimsson maintains Iceland’s economy IS in good health, and that defying the popular traditional European solution was crucial.
“Their decision involved the standpoint that somehow the European banking system was based on the premise that private banks could operate freely anywhere in the European market and if they succeeded, the bankers would get big bonuses, but if the bank failed, due to operations outside the home country of the bank, you could send the bill to ordinary people in their home country and they would pay through their taxes for years and decades to come.
"And that, to me is a disastrous formula for a European banking system, because it makes the banker irresponsible if they know that success makes them rich, and failure, simply you send the bill to the taxpayer. The referendums that took place, that every Icelander was empowered to be part of the decision, gave it back its optimism and that’s one of the reasons I believe the strength of the nation has helped us through this recovery process, which would not have been possible if somehow the nation felt it had been made to pay, wrongly for the mistakes of the bankers.”
I ask President Grimsson if he sees himself as the maverick most of Europe believed he was.
“I don’t see myself as a maverick, no. In many ways I’m quite traditional. I think the problem is more that others had moved so far in the direction of believing that the market is the fundamental premise of our society and therefore, the economic interests are somehow paramount and superior to the democratic and social and political dimension of society.”
Grimsson has now served nearly four terms, and is being asked to serve a fifth. I ask him if he’s surprised by this.
“Anybody who’s been given this kind of trust, has the moral and democratic duty to consider that responsibility. Some in the media contend that this was all an orchestrated plot, but I’m not that clever.”
Pall Stefansson, Editor of the Iceland Review is one of those in the local media who remains sceptical about President Grimsson’s original plans to step down.
“He is popular because he reads the mind of a nation, of the common people. Everybody I know dislikes him running again. You have a republic when you have the same man sitting there for 20 years. People who have been longer as a head of state, you come down to Cameroon, Senegal,'' he says
"The people who gave the 30,000 list of voters to the President urging him to run, there were no heavy people in politics, in culture, it was one former Minister of Agriculture, from the Progressive Party, but there was no heavyweights and I thought that was quite interesting.
"The problem is the popularity of Grimsson. I thin it’s a play because he said, ‘I’m going to step down,’ but he said it so loosely that he didn’t close the door.
"He said he wasn’t going to run but he didn’t close the door and there’s no heavyweight person who said they’re going to run because they know they would lose.”
Regardless, as Pall Stefansson explains, the crisis has defined Grimsson’s presidency.
“In the short term, it has made him so popular that nobody dares run against him.”
Beyond the matter of competition and the crisis, President Grimsson hopes he’s encouraged young Icelanders to be a part of the country’s future.
“I thought my most important contribution could be to strengthen the conviction of young Icelanders that their best option was to be rooted in Iceland while being able to operate.”
But Siggi Skeltesson isn’t convinced.
“I went to Norway in 2008 and I was there one and a half years, but my wife, she wants to come back to Iceland. But it’s better to live in Norway. It’s much better there. Of my friends, about 50 percent of them have already moved to and they are not coming back. So I think a lot of people will be moving in the next two years.''
Meanwhile, the Iceland Review's Pall Stefansson fears the very same democratic principles President Grimsson claims to hold dear, are now thrown into question with the possibility of a 20-year presidency.
“Who is running for five terms? OK, maybe in Mali, but not in Europe, in democratic society. I think Icelanders want to have a woman as President. It’s softer. We are tired of this businessman ego who made us crash.”
Perhaps it’s time for a bit of soft power in Iceland ... if anyone has the courage to run against Iceland’s most popular president.