The story was quite simple. At some stage around June 2008, the first signs of a banking crisis set alarm bells ringing for the Icelandic government, who tried, and failed, to implement extraordinary measures which included the nationalisation of its three main banks. In a bid to avoid the pending crisis, then Prime Minister Geir Haarde authorised the country’s Financial Supervisory Authority to take control of several main institutions, but the situation continued to worsen, much to the dismay of various European leaders – especially the Dutch and the British – who feared for the future of their citizens’ savings.
In 2010, after various attempts to resolve the situation, which had been closely monitored by the EU, the Icelandic Central Bank released details of an accumulation of assets over ten times greater than its GDP, the majority of which was in foreign currencies and notably pounds sterling. Due to this lack of cash flow, any bank that could not guarantee its services went into debt. The International Monetary Fund gave Iceland a 1.6 million euro loan on the condition that tough cutback measures would be taken. The forced resignation of the government, combined with citizen protests, heightened the country’s instability, a situation that was continuing to cause concern for the rest of Europe, and which ultimately resulted in certain members of the cabinet being brought before the courts.
The elections that followed brought a leftist coalition government to power, which in turn brought about a constitutional amendment and an open, and well attended, public trial of the country’s bankers. Despite the fact that this trial did not result in any prison sentences, it did nonetheless expose those responsible for the disaster.
One year later, with unemployment falling and the economy growing at almost the same rate as in the US, the signs of recovery spurred on European citizens to take charge of solving the crisis. Icelandic inflation and debt – both public and private – remain high, but the ‘Big Three’ credit rating agencies decided to upgrade the country, thus stabilising the situation. The OECD’s forecast for 2012/2013 predicts a 2.4% economy growth, and despite a few remaining issues that require attention, it appears that Iceland’s economy is rising from the ashes.
It goes without saying that the relative simplicity of this process has been favoured by the fact that we are talking about a country whose total population of 318,452 is less than that of the city of Bilbao. Even so, given the similarities between the Icelandic and Spanish banking catastrophes, it is not unreasonable to expect, as in Iceland, that some of those responsible in Spain should face up to their culpability. After all, even though things appear to be getting worse rather than better, an apology goes a long way in helping to smooth ruffled feathers.