The End of Iceland's Innocence: The Image of Iceland in the Foreign Media during the Financial Crisis

A Casualty of the Global Crisis—The First Domino to Fall

– 55 – A CASUALTY OF THE GLOBAL CRISIS THE FIRST DOMINO TO FALL ‘Iceland became a symbol and casualty of the credit crisis.’ La Presse, December 24, 20081 Iceland was not the only country grappling with the downturn, which was small consolation for a nation hit so hard: as Gérard Bérubé of Le Devoir reported, ‘the market shakeout was widespread and global’.2 All market watchers acknowledged that the crisis of 2008 was not like any other. Financial analysts, accustomed to market fluctuations, observed very severe turbulence and ‘totally insane movements, with no historical equivalent’.3 Among the culprits were hedge funds, which have large enough assets to destabilise companies, currencies and governments. In October 2008, hedge funds precipitated the global imbalance when ‘they urgently sold their assets, with animal fear’.4 The diffuse forces at work in the global economic crisis did not seem to follow any logic, creating cracks that appeared in some cases in large financial centres and in other cases in outlying areas. No country seemed to be sheltered from the random distribution of the effects; the powerful movement driving the crisis was as diffuse and inter1 Vincent Brousseau-Pouliot, ‘Les gagnants et perdants d’une année folle’, La Presse (Montréal), December 24, 2008. The original quote read: ‘Les Islandais sont devenus les victimes et le symbole de la crise du crédit’. 2 Gérard Bérubé, ‘Panique sur les places boursières’, Le Devoir, October 7, 2008. The original quote read: ‘la déconfiture boursière a été généralisée, et planétaire’. 3 Éric Galiègue, quoted by Agence France-Presse, ‘Marchés boursiers. Nervosité sans précédent des marchés’, Le Devoir, October 18, 2008. 4 Ibid. The original quote read: ‘ils liquident leurs actifs en catastrophe, dans une peur animale’. – 56 – connected as the process underlying the spectacular aurora borealis. The geography of the crisis was outlined as follows by the Financial Times in October 2008: [Italy’s Treasury Minister] Giulio Tremonti was almost gloating when he addressed the Italian parliament yesterday . He described the geography of the financial crisis with relish: the northern earthquake, with its epicentre in Iceland, its problematic ‘continental dimension’, the troubles in the UK, and the fear of a spillover into the Baltics and eastern Europe.5 Iceland was at the centre of events, and many images were used by the foreign press in an effort to describe the island’s situation and its connection with the global crisis. Iceland became both a symbol and a warning for other countries, as it was the first one to be hit: ‘The fate of Iceland’, wrote David Teather in an article in the Guardian, ‘is seen as a warning for the rest of the world’.6 Many journalists, seeing Iceland ’s predicament as an indication of what was to come, compared the country to the canary once placed in coal mines as an early warning system for toxic gases: In the second half of last year [2007], as the subprime crisis gathered strength in the US, articles appeared in the international press about Iceland as the ‘canary in the mine’. They suggested tiny Iceland ... was a leading indicator of how the crisis was mutating into something much bigger, affecting many countries beyond the US.7 Updates on Iceland’s very uncomfortable position spread rapidly and worried other countries, as they feared becoming the next casualty in 5 Financial Times, ‘Italy’s plan’, October 10, 2008, p. 16. 6 David Teather, ‘Iceland government seizes control of Landsbanki’, Guardian, October 7, 2008. 7 Robert Wade, ‘Iceland pays price for financial excess’, Financial Times, July 1, 2008. – 57 – the crisis. The image of the domino appeared repeatedly in the press: ‘The fear’, wrote Heather Scoffield of the Globe and Mail, ‘is that other countries like Iceland that are struggling to deal with large current account deficits will begin to fall like dominoes’.8 Observers wondered whether Iceland was an isolated case or the first movement of much more widespread turbulence. As with a fast-spreading virus, everyone was concerned about their own fate, wondering whether they would be the next victim, without any real sympathy for those already affected; and no one seemed immune. As Henry Thornton wrote in the Australian, ‘[there is a] lack of trust in the banks by their customers . In Iceland, we hear, the ATMs have no money in...