NationStates Jolt Archive

REYKJAVIK, Iceland —

Iceland's coalition government collapsed on Monday after an unprecedented wave of public dissent, plunging the island nation into political turmoil as it seeks to rebuild an economy shattered by the global financial crisis.

Prime Minister Geir Haarde resigned and disbanded the government he's led since 2006. Haarde was unwilling to meet the demands of his coalition partner, the Social Democratic Alliance Party, which insisted on choosing a new prime minister in exchange for keeping the coalition intact.

"I really regret that we could not continue with this coalition, I believe that that would have been the best result," Haarde told reporters.

Iceland has been mired in crisis since October, when the country's banks collapsed under the weight of debts amassed during years of rapid expansion.

Thousands of angry citizens have joined noisy protests against the government's handling of the economy, clattering pots and kitchen utensils in what some commentators called the "Saucepan Revolution."

The value of the country's krona currency has plummeted, hitting many Icelanders who took out special loans denoted in foreign currencies for new homes and cars during the boom years. In addition, Iceland must repay billions of dollars to Europeans who held accounts with subsidiaries of collapsed Icelandic banks.

Haarde's government has nationalized banks and negotiated about $10 billion in bailout loans from the International Monetary Fund and individual countries.

Haarde - a fiscal conservative with degrees from the University of Minnesota, Brandeis and Johns Hopkins - is suffering from cancer and has announced he would not seek another term. He called early elections last week, following the mass protests by Icelanders upset at soaring unemployment and rising prices.

Though largely peaceful, the protests have seen Reykjavik's tiny parliament building doused in paint and eggs hurled at Haarde's limousine. Last Thursday, police used tear gas to quell a protest for the first time since 1949.

Haarde said last week that he wouldn't lead his Independence Party into the new elections because he plans to seek treatment in the Netherlands for his cancer.

Following discussions with Haarde, Iceland's figurehead President Olafur Ragnar Grimsson said he would hold talks with Iceland's four other main political parties late Monday before asking one of the organizations to form an interim government.

On Tuesday, he's likely to ask Foreign Minister Ingibjorg Gisladottir, head of the Social Democratic Alliance, to govern with smaller opposition parties until new elections are held. Gisladottir said she wouldn't agree to take part in a national government composed of all five major political parties.

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"We should have a result no later than tomorrow (Tuesday) morning," Steingrimur Sigfusson, chairman of the opposition Left-Green movement told RUV television. "The only real possibility is a minority government."

Gisladottir said Monday she won't seek to personally replace Haarde as Iceland's leader. She instead proposed her party's popular Social Affairs Minister Johanna Sigurdardottir.

The restoration of trust in the government is critical, said Iceland's Environment Minister Thorunn Sveinbjarnardottir, an alliance member.

"What is needed straight away is to try to restore trust between the political establishment and the general public," Sveinbjarnardottir told The Associated Press. "What we need is for the general public to believe that the politicians are working in their interests."

Both the demonstrators and the alliance seek the ouster of Central Bank Gov. David Oddsson, who has served for 13 years.

Sveinbjarnardottir said Oddsson's ouster should be accompanied by the tightening of regulations in the country's financial industry. "We need a certain amount of cleansing to be the first steps," she said.

At a rally Monday outside Parliament, protester Svginn Rumar Hauksson said demonstrations won't end yet.

"The protests will continue until it becomes clear that things are really changing," he said.

---

Associated Press Writer Valur Gunnarsson in Reykjavik contributed to this report. Link (http://seattletimes.nwsource.com/html/businesstechnology/2008671186_apeuicelandcrisis.html)
Well this is not good.

They had the same sort of thing we had happen. ( deregulation causing problems, thank you very much Milton Friedman for telling the right wing party all about how wonderful laissez-faire is.) But unlike the US Government, their government didn't have enough money to bail everyone out. So the population is in revolt.

I think I said it last time the subject went up but...

So it begins...

I thought Russia already started pumping money into Iceland (most probably not out of pure compassion)...

Serves them right for being terrorists.

Serves them right for being terrorists.

Lol wut?

Serves them right for being terrorists.

Haha, wtf?!

I haven't heard about the Icelandic terrorists...

:eek:

...because they are too damn sophisticated maybe...

Ex- PM Geir Haarde should have fallen on his sword when he let the economy collapse around his ears.

This underlines my dislike of convenience coalitions. Never get anything done.

I generally agree but Britain had a Conservative-Labour war cabinet in WWII and it surived till 1945 and Australia has had a remarkably successful Liberal and National Party coalition.

I think it was neo con policies that stuffed up Iceland. They didn't regulate their banking.

Haha, wtf?!

I haven't heard about the Icelandic terrorists...

:eek:

...because they are too damn sophisticated maybe...

In 2008, after successfully selling numbers to foreigners and calling it money, Iceland decided to expand its economic growth even further by introducing an elaborate system of state terrorism. Gordon Brown declared war on Iceland but as the English have come to know through the glorious Cod Wars, Iceland can kick England's ass at anything, any time.

As a result, the Icelandic parliament changed the national motto from "þetta reddast" (loosely translated as "fuck it"), to "fuck you", the first time Iceland has ever adopted a national motto in the English language. The intention is to cool relations with England, of course and as usual having the exact opposite effect.

There is no constitutional right to bear arms in Iceland, but parliament intends to rectify this in 2010 by guaranteeing all citizens of Iceland the right to blow things up.

I generally agree but Britain had a Conservative-Labour war cabinet in WWII and it surived till 1945 and Australia has had a remarkably successful Liberal and National Party coalition.

Liberal-National isn't really a convenience coalition; they generally agree on many issues.

This is just the first of many.

I agree. I am cheering as the tumbrils roll on.....all these politicians who were greedy or stupid or both who brought into the free market lies and refused to protect their citizens are now paying the price.
Unfortunately, there is a fair bit of collateral damage along the way.

In 2008, after successfully selling numbers to foreigners and calling it money, Iceland decided to expand its economic growth even further by introducing an elaborate system of state terrorism. Gordon Brown declared war on Iceland but as the English have come to know through the glorious Cod Wars, Iceland can kick England's ass at anything, any time.

As a result, the Icelandic parliament changed the national motto from "þetta reddast" (loosely translated as "fuck it"), to "fuck you", the first time Iceland has ever adopted a national motto in the English language. The intention is to cool relations with England, of course and as usual having the exact opposite effect.

There is no constitutional right to bear arms in Iceland, but parliament intends to rectify this in 2010 by guaranteeing all citizens of Iceland the right to blow things up.

Hmm... Not all that convicing. Fairly sure Iceland's government is called Althing, not parliament.

The problem when your as small as Iceland is that 90% of your economy will be dictated by your trading partners. I would hold the US's and the EU's policies more responsible then anything the domestic government can come up with short of 100% government employed/owned communism.
My Icelandic friend claims their banks were fine until the UK froze their assets using anti terrorism laws.

This was in the Telegraph online on October 3rd last year. The UK wanted to salvage some of its assets before Iceland bellied-up. Using the anti-terror laws was a bit desperate though:
Iceland's economic woes cause shivers through British economy
Iceland's economy appeared to be in a perilous position, with serious ramifications for scores of British businesses and savers.

By Harry Wallop, Consumer Affairs Editor
Last Updated: 7:39PM BST 03 Oct 2008

Its currency, the krona, has fallen 27 per cent against the dollar this week, while its largest bank Kaupthing – which has lent money to many British entrepreneurs and businesses – started to ask its clients for more money to help it shore up its balance sheet.

Iceland's problems emerged as the US Congress voted in favour of George W Bush's revised $700 billion (£380 billion) bail-out package for the US economy. It was passed by 263 to 171 votes and is likely to provide a boost to stock markets around the world next week.

Even before the vote came through, hopes of its success had helped shares in New York and London climb by more than 2 per cent.

The UK stock market was also aided by the Bank of England loosening the rules to make it easier for banks to borrow money from it. It said it will accept slightly lower quality assets in return for an extra £40 billion that it is pumping into the system.

The Icelandic Government is in talks with its central bank about a similar bail-out to save its financial system from collapse.

Iceland, whose population is the size of Coventry, has witnessed an incredible boom in recent years, as its banks have borrowed cheaply to invest in large variety of businesses around Europe, particularly the UK.

However, the miracle has unravelled spectacularly in recent months and yesterday the Government said it was looking for money to help it survive the global financial crisis.

The drying up of credit globally and the fall in Iceland's currency has led to worries the banks may not be able to refinance their debts.

Its three main banks have liabilities that equate to eight times the country's entire gross domestic product, which means they may not be able to turn to the Icelandic Government for help.

"The economic situation has in a short space of time changed very much for the worse," Prime Minister Geir Haarde said. "Government, companies, households and people have seldom faced such great difficulties."

Bjorgvin Sigurdsson, the commerce and banking minister, said the government was seeking "a large loan" from abroad to strengthen the crown.

Glitnir, the country's third largest bank, was effectively nationalised at the start of the week.

There are now questions over the future of Kaupthing, the country's largest bank, which has substantial interests in Britain. The Government has denied it needs to nationalise the bank.

The bank has helped to bankroll some of Britain's best-known entrepreneurs including Robert Tchenguiz, the holder of sizeable stakes in supermarket group J Sainsbury, pub chain Mitchells & Butlers, restaurateur Gordon Ramsay, as well as being one of the biggest investors in Baugur, the firm that owns stakes in high street retailers such as Hamleys, House of Fraser, Oasis and Debenhams.

Kaupthing has also been one of the biggest backers of the brothers Nick and Christian Candy. It advised Mike Ashley on his £134m purchase of Newcastle United football club.

It also owns Kaupthing Edge, a very popular internet savings bank, which along with Icesave – owned by the Icelandic bank Landsbanki – has attracted about 150,000 British savers thanks to its high savings rates.

"There will be 150,000 savers in the UK who will be feeling very jittery," said Kevin Mountford, head of savings at the personal finance website MoneySupermarket.com.

Savers with Kaupthing have the same rights as British investors, with the first £50,000 protected from Tuesday next week.

Savers with Icesave face a slightly more complicated process, as they fall under the Icelandic scheme at first, which protects the first €20,000 (£15,600), with the British scheme taking protecting the rest.

A spokesman for Kaupthing said: "Savers in Kaupthing Edge should be reassured that their money is safe.

"Also, it has very little exposure to the UK high street."

Corporate clients that have borrowed money from the bank to buy shares have been contacted by Kaupthing in recent days and asked for more money if they want to continue holding the shares.

Armann Thorvaldsson, the chief executive, said the move was part of a plan to "deleverage its business as part of its prudent risk management".

"Over the last week we have been going proactively to clients and closing down positions in a sensible and measured way. We are not the first to do this and we certainly will not be the last," said Mr Thorvaldsson.

Lol wut?

Haha, wtf?!

I haven't heard about the Icelandic terrorists...

:eek:

...because they are too damn sophisticated maybe...

Our esteemed PM Gordon Brown used anti-terror legislation to freeze Icelandic bank assets in the UK.

http://news.bbc.co.uk/1/hi/uk_politics/7688560.stm

http://www.indefence.is/

They had the same sort of thing we had happen. ( deregulation causing problems, thank you very much Milton Friedman for telling the right wing party all about how wonderful laissez-faire is.) But unlike the US Government, their government didn't have enough money to bail everyone out. So the population is in revolt.

I think I said it last time the subject went up but...

So it begins...

Not quite. Iceland is more a case of what can go wrong if your incompetently regulated. you see they put old politicians in charge of the bank just to keep them from doing any harm to government.
Well these old politicians decided they need more capitol in their banks so they raised the interest rates. However with interest rates so high they really don't make very many loans, so they have to make their money via the investment route(normally hedging against the dollar). The problem with this is the dollar stopped dropping like a rock and all the other investments dried up because of a recession. However rather then do the sensible thing of lowering the interest rate on your savings accounts they just left the interest rates nice and high turning the bank of Iceland into a Ponzi scheme.

...because they are too damn sophisticated maybe...

Iceland is now the new Poland.
I got a few over cleaning my house for a pittance.

http://www.indefence.is/

Holy shit, some of those postcards are awesome!

Our esteemed PM Gordon Brown used anti-terror legislation to freeze Icelandic bank assets in the UK.
Aye that'll learn them to tangle with people with more power than them.

I am not seeing the humor in this stupid terrorism thing.

Holy shit, some of those postcards are awesome!

I want to get a few of these for my personal use.

iceland, like all ice-o-lated places, needs narrow gauge trains, and to make them themselves. preferably with battery powered loco's with onboard solar charging. or stopping place auto-recharging: and whatever happend to all their geothermal to charge their grid, or was that greenland. they need lots of little trains too.

I know I'm talking into a hurricane with my inside voice here, but would people please stop bringing "deregulation", Milton Friedman or anything else of the sort up without any type of fact to back their claims? It's easy to answer an argument, it's impossible to answer a claim.

I am not seeing the humor in this stupid terrorism thing.

It's mostly from when they brought it in there were concerns raised about them being misused in relation to non-terrorist things. These were dismissed by the Labour Government. So when they did in fact do exactly that...

Plus the general hilarity of the UK listing Iceland alongside Al-qaeda.

This news is a little out of date, but it underscores the problems Iceland is facing:

Economy Might Force EVE Online Dev. Out of Iceland (http://www.shacknews.com/onearticle.x/56524)

Here's the thing: CCP is a very international corporation - possibly more renowned than any other Icelandic corporation. And with most of their customer base abroad, they're extremely resistant to local economic crises. For instance, the collapse of the Icelandic krona will have little direct effect - most of CCP's income is in dollars, pounds, or euros. So if they're considering leaving, think about how bad it must be for local Icelandic businesses that don't have an international customer base.

This news is a little out of date, but it underscores the problems Iceland is facing:

Economy Might Force EVE Online Dev. Out of Iceland (http://www.shacknews.com/onearticle.x/56524)

Here's the thing: CCP is a very international corporation - possibly more renowned than any other Icelandic corporation. And with most of their customer base abroad, they're extremely resistant to local economic crises. For instance, the collapse of the Icelandic krona will have little direct effect - most of CCP's income is in dollars, pounds, or euros. So if they're considering leaving, think about how bad it must be for local Icelandic businesses that don't have an international customer base.

I think he is more concerned with the unemployed Icelanders looting his stash of dollars and euros.

I think he is more concerned with the unemployed Icelanders looting his stash of dollars and euros.

Eh, if that happens, CCP just makes attendance at the next FanFest mandatory. Nets them an army equal to the actual population of Iceland.

Eh, if that happens, CCP just makes attendance at the next FanFest mandatory. Nets them an army equal to the actual population of Iceland.

And the US gets their money back by selling CCP weapons to man the fanfest army.
The US makes profit and CCP declares a corporation state run by them. WIN WIN really except for the people of Iceland working in a state with an abolished minimum wage.

wait... what?

So the PM refused to give in to demands that he resign and so is forced to call an election due to the collapse of the coalition government, but announces that he won't be standing in the election anyway...

I'm confused.

wait... what?

So the PM refused to give in to demands that he resign and so is forced to call an election due to the collapse of the coalition government, but announces that he won't be standing in the election anyway...

I'm confused.

he also dismissed the althing until there is an election.

They had the same sort of thing we had happen. ( deregulation causing problems, thank you very much Milton Friedman for telling the right wing party all about how wonderful laissez-faire is.)

Wait.

You're seriously blaming free markets for problems that were caused by the lack of free markets, and could have been prevented if free markets were expanded beyond where they were?

That's ludicrous.

Wait.

You're seriously blaming free markets for problems that were caused by the lack of free markets, and could have been prevented if free markets were expanded beyond where they were?

That's ludicrous.

It also could have been prevented if they hadn't tried to go around the government using risky market ideas.

Iceland chooses a lesbian (http://www.upi.com/Top_News/2009/01/28/Iceland_to_name_openly_gay_prime_minister/UPI-90501233173410/) Prime Minister.

Well, sucks for Iceland I suppose...Question is, what do they intend to do now? Ask Denmark for help? lol

It also could have been prevented if they hadn't tried to go around the government using risky market ideas.

I can argue that it all could have also been prevented if the CEOs in question behaved in a competent manner. The first responibility of a financial manager is to maximize the shareholder's wealth. Shareholder wealth and short term profits are not always the same. However, the culture of Wall Street in reagrds to compensation rewarded short-term profits over long-term wealth maximization. The subprime mortgages and various deriviative products produced absolutely massive short-term profits but were not sustainable in the long run as lending money to people who can't pay it back tends to be a bad idea. Unfortunately, the size of these bad assets were sufficient enought o damage the entire economy when they collapsed, not just the fools who were directly involved.

Also, I'll echo Neu Leonstein's position on deregulation. Name me one regulation that was in place that "neo-cons" repealed that could have prevented this mess. The fact is the free market does work and actually worked perfectly well in this case. The mess was caused people gaming the system and creating several massive asset bubbles that collapsed almost as one and caused the chaos we see today.

I'm confused.
He's stepping down for "health reasons". Like Erich Honecker.

Also, I'll echo Neu Leonstein's position on deregulation. Name me one regulation that was in place that "neo-cons" repealed that could have prevented this mess. The fact is the free market does work and actually worked perfectly well in this case. The mess was caused people gaming the system and creating several massive asset bubbles that collapsed almost as one and caused the chaos we see today.

Isn't the point of the free market that people try and game the system?

Isn't the point of the free market that people try and game the system?

Not really, however I will admit that "gaming the system" was a poor choice of phrase. What I meant was that a combination of factors (lax regulatory oversight, the use of Fannie Mae and Freddie Mac to push the "affordable housing" mantra, the fact that Greenspan kept rates too low, poor underwriting standards, and a lack of financial literacy but many consumers) drove housing prices to levels far in excess of what the market could actually bear. The plunge in housing prices is actually a simple process of the market restoring itself to sustainable levels. The fact that it's fallen so far is sign of just how inflated things had gotten. Of course when housing corrected it hurt many (not all ) banks seriously, eroded consumer confidence considerably, and started the ball rolling towards our current situation. Had housing prices been elft alone to appreciate at a resonable pace most of this mess could have been avoided.