Rebuilding Iceland

REYKJAVIK- The Land of Fire and Ice is ready to rebuild. Once hailed as the most developed nation in the world, Iceland is not backing down from the daunting task of restructuring its recently crippled economy and collapsed government. Iceland has been one of the hardest hit countries in the most recent global economic recession but unlike many they may stand the best chance of recovery. Now, the country is looking ahead to the future and to re-establishing itself as one of the most stable nations in the world.

Between 2003 and 2007, the Icelandic stock market multiplied almost nine times. Last fall, as global markets plummeted, Iceland’s banks found themselves with no way to refinance loans. The small country of just over 300,000 people was unable to bail out a banking system which now owed over six times its gross domestic product. Early in September, the Icelandic government stepped in, buying large shares in one of the largest banks. By early October, the situation had become much more desperate. Through the use of anti-terror laws, the United Kingdom was able to freeze Icelandic assets in UK-based institutions when it was announced that UK funds in Icelandic banks could not be guaranteed. Iceland bought its three largest banks in a last-ditch effort to save its economy.

“A few people made a few very grave mistakes but I think they’ll come out of it alright. They [Iceland] put no real regulations on the banks. Without regulations, the banks ended up in the hands of a very few people who just went hog-wild,” Elisha Lee, the Honorary Consulate to Iceland in Boston said.

By late November, Iceland became the first Western country to receive a loan from the International Monetary Fund since 1976. After receiving the IMF’s $2.1 billion loan, inflation in Iceland rose to a record high of 17.1 percent. By the end of January 2009, the people of Iceland had seen enough. Protests and a battle against throat cancer led Former Prime Minister Geir Haarde to announce a general election for the spring.

Many Icelanders felt the pinch of the economy. Vals Dottir Iris, treasurer of the Icelandic Society of Boston, said her family is an example of the wide-ranging effects of the economic situation in Iceland. “My brother lost his job. He was a carpenter. My brother-in-law is in 3D animation and he lost his job as well,” she said.

Headed by Johanna Sigurdardottir, the first openly lesbian prime minister, Iceland is looking ahead to the future. “It’s a new perspective. She’s a tough broad. She’s not going to put up with any nonsense. She’s kind of like a breath of fresh air. I feel that she’s not one of the good ‘ol boys,” Iris said.



One proposal for quickly restoring Iceland’s economy is a move to join the European Union and adopt the Euro. Irish agrees with this plan. “Absolutely. I’ve preferred that for years. Everyone is just worried about their fishing territories. I think it’s time to get with the program,” she said. Traditionally, Icelanders have been opposed to joining the EU because of the loss of rights in their fishing lands. Some still do not believe that stability can be found in the EU. “I’m not sure that the Euro is going to last. I’m not sure that that would be the best idea,” said Lee.

“I think Iceland will come out of it alright. They’re got a very educated, literate population,” Lee said.

According to a press release, major changes have been made to the country’s banks, including the establishment of a monetary policy committee. The additions and recent changes were made in order to increase confidence within Iceland and abroad.

“Obviously I hope everything will get back to normal but they have a long, long road ahead of them,” Iris said. “It's going to take a long time to regain trust in the international markets. It’s going to take another decade at least.”

*written for International News- 4/09, photo courtesy of the AP.