Iceland’s exports: volcanic ash, Björk – and Haarde justice for Europe’s leaders?

The fallout from Eyjafjallajökull — that unpronounceable Icelandic volcano which two years ago spewed a cloud of ash from the British Isles to beyond the Baltics, closing airports as far away as Paris and Prague — was nothing when compared to the political ramifications the ongoing trial of Iceland’s former prime minister could potentially bring.

Apart from fish, perhaps the best-known export of the tiny island nation (population 320,000), the only NATO member state without a standing army, is Björk, the eccentric and similarly tiny singer. But now, a radical concept — that a politician can be held criminally accountable for failing to prevent an economic collapse — could prove to be Iceland’s most far-reaching export: Last week it became the first country to put a former leader on trial for mishandling the financial crisis.

Following the privatization of Iceland’s banking sector in the early 2000s, domestic lenders expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign currencies. Before Iceland’s three largest banks collapsed in September 2008 and were put into receivership — and here, the fallout also spread throughout Europe, with Prague financial institutions not immune — Icelandic banks’ extended loans and other assets exceeded the nation’s GDP more than tenfold.

After the collapse, the country’s Financial Supervisory Authority used permission granted under emergency legislation to take over the domestic operations of the banks (Glitnir, Landsbanki and Kaupthing). The stock exchange — which didn’t even exist before 1990 — lost 90 percent of its value, and in 2009 Iceland’s GDP contracted 6.9 percent.

© YouTube — Geir Haarde lectures about the case of Iceland and the global crisis, in June 2009

The charges against Geir Haarde, the country’s minister of finance from 1998 to 2005 and prime minister from 2006 until early 2009, who led the Independence Party government, include “serious neglect of his duties … in the face of major perils looming over Icelandic financial institutions and the state treasury, a danger he knew of, or should have known of.”

Closely watching the trial at Reykjavik’s Culture House will be citizens of other debt-ridden European countries, like Greece and Ireland, who have seen their savings and pensions evaporate — and the politicians who, like Haarde, failed to prevent the financial meltdown.

Also watching will be opposition politicians across Europe, who will look to seek how the courtroom drama plays politically, regardless of the verdict or the case’s merits. Not to mention the British and Dutch authorities, who are owed some $5.5 billion for compensating their respective citizens who lost deposits in Iceland’s online bank Icesave when parent bank Landsbanki failed in 2008. (When Icesave collapsed, the then UK Prime Minster Gordon Brown accused Gaarde of “illegal” behavior after Iceland said it could not give a guarantee to reimburse UK customers).

12 angry nations

Legendary Czech actor and satirist Jiří Voskovec, who parted ways with his long-time comedic partner Jan Werich after World War II to make his way in Hollywood, was among the “12 Angry Men” in the famous 1957 film about a dissenting juror (played by Henry Fonda) who slowly manages to convince the others that a seemingly black-and-white murder case is not as clear as it seems.

“If you want to vote ‘not guilty,’ then do it because you are convinced the man is not guilty, not because you’ve had enough. And if you think he is guilty, then vote that way! But don’t you have the guts to do what you think is right?” is one of the more memorable lines that Voskovec, as juror No. 11, was given.

That Oscar-winning film springs to mind for a number of reasons. The case against Haarde is highly political, anything but clear cut, and likely to last for at least two grueling weeks, with the court expected to take another four to six weeks to deliver a verdict. But it is the coincidental number 12 that actually spurred the analogy. As the US magazine Foreign Policy noted last month, Haarde was the first of 12 European leaders eventually taken down by the financial crisis. In chronological order, they are:

1. Geir Haarde (Iceland), Feb. 1, 2009;
2. Ivars Gomanis (Latvia), March 12, 2009;
3. Ferenc Gyurcsány (Hungary), April 14, 2009;
4. Viktor Yushchenko (Ukraine), Feb. 25, 2010;
5. Gordon Brown (Britain), May 11, 2010;
6. Brian Cowen (Ireland), March 9, 2011;
7. José Sócrates (Portugal), June 21, 2011;
8. George Papandreou (Greece), Nov. 10, 2011;
9. Silvio Berlusconi (Italy), Nov. 16, 2011;
10. José Luis Rodríguez Zapatero (Spain), Dec. 21, 2011; 
11. Emil Boc (Romania), Feb. 6, 2012
12. and finally, Iveta Radičová (Slovakia) who lost the elections this Saturday (March 10).

Iceland’s 2008–2011 financial crisis bankrupted the nation and contributed to the recession from which Europe has yet to emerge (volcanic ash being rather easier to tidy up after than multinational banks in receivership). The island nation’s banking crisis was “something of a preview of things to come for the rest of the continent” and Haarde’s government “the first to fall as a direct result of the economic crisis,” Foreign Policy noted.

Could the trial of the Icelandic leader — who stepped down on Feb. 1, 2009 following weeks of street protests — also set a precedent in Europe? Haarde is not charged with creating the bubble that burst so spectacularly in Iceland, nor of corruption, nor of criminally profiting from the policies he helped put in place. It’s not what he did, but rather what he allegedly didn’t do that has landed him in court.