lessons from Iceland – the new IMF poster-child

In 2008, Iceland suffered the third largest financial meltdown in history. It was a crisis that had been triggered when some of Iceland’s leading bankers were caught running a Ponzi scheme, and as a consequence, Gordon Brown’s government actually applied anti-terrorist legislation to freeze Icelandic bank assets in Britain:

“We’re still on the list — in the wonderful company of al-Qaeda, the Taliban, Sudan, North Korea, Iran and a number of other entities — where we do not belong,” Iceland’s Prime Minister, Geir Haarde, said in an interview with TIME, referring to the British government’s website listing of regimes subject to financial sanctions. “The application of the antiterrorist legislation has created a lot of ill will here,” said Haarde — particularly in combination with London’s demand that the Icelandic government recompense British depositors in a subsidiary of the failed Icelandic bank Landsbanki to the tune of $5 billion, or “roughly half of Iceland’s GDP,” Haarde added. “Our parliament will never agree to accepting that kind of debt burden. It’s unsustainable.”1

So you might very reasonably suppose that some of these ‘financial terrorists’ would by now have been put away behind bars, but think again. Instead, this same criminal elite is not only at large, but still very much in the business of financial speculation. Meanwhile, and in time-honoured tradition, it’s the people of Iceland who are being punished for these crimes; with the country already in ruins and their government having to run into the arms of the IMF to secure a $2 billion loan, which it may or may not have spent (this apparently remains unclear), but which has certainly not as yet been repaid.

On Wednesday [Nov 2nd], Birgitta Jónsdóttir, who is a member of the Icelandic parliament (Althing), formerly representing the Citizen’s Movement, but now one of three Icelandic MPs representing The Movement (Hreyfingin), spoke with Max Keiser on Russia Today‘s Keiser Report. She told him:

“The interesting thing is that the IMF has now decided to use Iceland as a promotional kick for them being the new cuddly and soft IMF. I had to remind the people from the IMF, at the conference in Iceland last week, about their policy in Greece, and their policy and programme in Lithuania, where they indeed have not changed anything from the previous disasters in Asia. But they’re still trying to market the IMF as if it has changed. And I think it’s dangerous. Many economists who looked at the Icelandic example have proved that the IMF has changed. Now, hear my warning, they have not!”

Of course, ‘help’ from the IMF always comes with strings attached; a set of ‘conditionalities’ that demand the fire sale of national assets and the weakening of welfare systems, which is precisely what’s happening to Iceland right now:

“We had an IMF deputy managing director speaking at this conference in a panel. She said that the IMF had helped strengthen the welfare system. Which is, of course, a ludicrous lie… We are having an exodus out of Iceland. We don’t even have properly staffed hospitals. And all the hospitals have been slashed so badly that we’ve been getting letters from all of them – the parliamentarians in Iceland – just basically saying that they can’t cut any more unless we will have health hazards. The same applies to the educational system.”

Yet in spite of such IMF involvement, Jónsdóttir says that there’s still no transparency in the Icelandic banking system:

“I think that we have to bear in mind that most politicians, or you know, people in power are puppets. They’re puppets for the financial sector. And we just have to face it. And it is really time that we looked beyond the traditional politics, because let’s face it, our democracies, they are dictatorships with many heads. Because we, the people, we do not have access to decision-making, or to making sure that they are doing their jobs in favour of our needs, and the needs of the great many, but only the few.”

But in a way, Iceland have escaped lightly, because at least their banks were allowed to fail, which means no more bail-outs, and so, unlike with the situation in Greece, there has been no descent into such a bottomless debt spiral. And unlike the Greeks, the people of Iceland were granted not one, but two referenda (March 2010 and April 2011) and, on both occasions, very sensibly voted against a bailout. Although, as Jónsdóttir explains, there were also more practical reasons for the Icelandic default and the collapse of their banks:

“It was not because the Icelandic government was so smart that they decided to let the banks fail. They just couldn’t get the money to save them. Everybody thought that was really bad, but that actually has turned out to be a great blessing for us. That the three banks were actually allowed to fail.”

Jónsdóttir says that she doesn’t believe the IMF will ever change because “we all know what the function of the IMF is. And that is not to look after the people but to look after the people that have the power. So they’re looking after the 1%, not the 99%.”

However, during the recent IMF conference in Iceland, a surprise suggestion did apparently come from the chief economist of Citigroup, Willem Buiter, who said that there should be a debt jubilee for Iceland.

Jónsdóttir adds that:

“Maybe that time has come everywhere. Maybe it’s time that we start anew. And I think that what I’ve been hearing everywhere is that people don’t trust in the system – any aspect of the system, because the system is self-serving; it doesn’t matter if it’s the financial system or other systems. So yeah, why don’t we take this good man’s advice and have debt jubilee everywhere.”

1 From an article entitled “Iceland to Britain: ‘We’re no terrorists’”, written by Jonas Moody, published by Time on November 3, 2008. http://www.time.com/time/world/article/0,8599,1855901,00.html

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1 Comment

Filed under austerity measures, Britain, debt cancellation, Greece, Iceland, Max Keiser

One response to “lessons from Iceland – the new IMF poster-child

  1. Anna

    Global Debt Crisis

    The greatest private fraud of human history.
    Who are the great fraudsters who are becoming the murderers of the human kind? How does the economy “illness” threaten Democracy and the freedom of people?

    http://eamb-ydrohoos.blogspot.com/2012/01/global-debt-crisis.html
    ———————————
    By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total …understand where this plan started just to bring all states at the same end …understand how this type of plans are established…

    Authored by PANAGIOTIS TRAIANOU

    Like

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