National pride gave Icelanders tunnel-vision

Icelanders have been hardened by centuries of natural catastrophes. They know how to react in the face of erupting volcanoes, floods, earthquakes, drift ice, mudslides and avalanches. A financial catastrophe is something else altogether.

An independent commission has tried to find out what caused the collapse of Icelandic banks in the autumn of 2008. One of its conclusions is that too few people were given too much power when the banks were privatised in 2002. 

The nearly 2,300 page report was a bombshell for a short while before being covered in volcanic ash from the glacier volcano Eyjafjallajökull.

There was no panic despite roads and farms getting covered by melting waters from the  glacier or volcanic ash. Well-rehearsed emergency plans for natural catastrophes were executed and the appropriate measures taken.

There was no emergency plan for the financial crisis. There was chaos in both the central bank and in parliament.
The investigative commission strongly criticises the authorities for failing to prepare for an economic crisis. It says the seriousness of the situation should have been identified at a much earlier stage.

Now the Icelandic people must take the brunt of the melt-down without having been allowed to enjoy the spoils of the boom years. Icelanders are suddenly facing huge debts and a dramatic rise in unemployment, and they have developed an unprecedented hatred towards politicians and bankers. 

It's raining excuses and senior people are vacating their seats. Actors read the entire report out load at the Reykjavik City Theatre, protestors are demonstrating outside politicians' homes and the biggest players in the now defunct financial market don't even dare take their children swimming in Iceland's wonderful outdoor pools.  
Sometimes the mood is hateful.

Hulda Torisdottir, a political scientist at the University of Iceland, is taking part in a series of lectures on the banking crisis in high schools around the country. She says the country's small population of just over 300,000 people played their part in what happened. National pride can be a good thing for a small country trying to be heard in a big world - but it gave Icelanders tunnel vision. They wouldn't listen to warnings from abroad, but dismissed them as envy and bullying. Bankers showed the same flock mentality. Highly educated but inexperienced young men enjoyed leading positions, says Torisdottir. These groups are inclined to go to extremes and ignore the advise of others. Torisdottir also warned against the flock mentality emerging in the country now, where people are equating capitalism and market economy with moral decay.

While those guilty of the economic collapse are being crucified in the public debate - according to the report they are bankers, civil servants, financial sharks, politicians and even the President - hundreds of volunteers gather at farms near the Eyjafjallajökull volcano to remove ash from houses and fields. Gudmundur Jonsson, a history professor, says in terms of GDP the Icelandic financial crisis is the largest ever both internationally and historically. Stocks and bonds worth 45 billion Euro were wiped off the markets. The private sector became the world's most indebted.

According to Mr Jonsson you need to look further back in history than the privatisation of the banks to find the real causes of the crisis. The start of the 1990s saw a new policy aimed at turning the country into an international financial centre. Iceland joined the EEA (European Economic Area), lowered taxes and tried to activate economic tools which had been dormant for a long time.

But the economic system was not ready for such far reaching changes, says Jonsson. The authorities should have kept it on a short leash, but ended up giving the economy too much rope, especially as the country had one of the world's worst performing currencies. 

Bankers took advantage of the situation of course, he says, and blames the politicians. 

Jonas Fridrik Jonsson, the former head of Iceland's Financial Supervisory Authority, points out that it is the person who is speeding who is breaking the highway code, whether the police is trying to slow him down or not.

The debate has seen a lot of talk about poor morals during the boom years when modern day vikings traveled the world to buy well-known companies, banks and hotels. Everything went as long as it wasn't completely illegal. Nothing was allowed to stand in the way of maximising your share.

Icelanders seem prepared to face their egotistical and narcissist past. It is really unusual for people in Reykjavik to take to the streets in protest, burn park benches outside Parliament and sabotage TV cables during live transmissions. It is an expression of deep frustration. People also feel let down by their international friends, among them the other Nordic countries, whom they feel have driven them into the arms of the International Monetary Fund. The UK and Holland are particularly ill perceived for the way they have handled the so-called Icesave dispute - trying to reach a settlement to pay back money lost by people who'd invested their savings in Icelandic banks abroad.

Icelanders voted against the government's agreement with the UK and Holland in a referendum. They got the support of President Olafur Ragnar Grimsson, who refused to sign the agreement. 

Grimsson was the people's hero until the publication of the commission's report earlier this month. The report severely criticises the President for his backing for the exploits of the modern vikings, and this has led to calls for his resignation. 

Poltical scientist Eirikur Bergmann points out that the President made comparisons between the Icesave referendum and the birth of democracy in ancient Athens. Bergmann feels the quality of the debate has not changed much on the highest level since before the banking crisis. 

Icelandic media keeps reporting on the commission's conclusions while covering the volcanic activity and the volcanic ash which paralysed the whole of Europe's air traffic.

The Icelanders have kept their humour and irony, in any case. They say the last wish of the country's economy was for its ashes to be spread across Europe.