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

Irresponsibility—Who Should Pay the Price?

– 198 – IRRESPONSIBILITY WHO SHOULD PAY THE PRICE? ‘The blame game is only just beginning ... Iceland’s business and political community bear an important part of the responsibility, even as they now play the victim.’ Fortune, December 4, 20081 Who is responsible for the financial crisis in Iceland and its repercussions abroad? Who should pay the price? Were the nation’s institutions and politicians complacent toward the new Vikings? Were the regulations governing the financial system applied with sufficient stringency? Did the entire country lack foresight? Can the blame be placed on others indefinitely? The issue of irresponsibility was discussed in much of the commentary, analysis and news concerning Iceland in 2008. It deeply tarnished the country’s reputation for reliability , built up in the past few decades: could Iceland still be considered a reliable partner? The first reaction of the Icelandic government, faced with accusations of irresponsibility, was to declare that it had not failed in any way. The International Herald Tribune had this quote from the Prime Minister: ‘Despite the collapse of the banks, Haarde said, ‘the country itself is not in default, is not abrogating its responsibilities.’2 This position was maintained for weeks, even at the peak of the crisis, right up until the government stepped down in January: ‘[Icelandic] authorities have 1 Peter Gumbel, ‘Iceland: the country that became a hedge fund’, Fortune, December 4, 2008, http://www.money.cnn.com/. 2 Eric Pfanner, ‘Iceland banks face claims from depositors abroad’, International Her­ ald Tribune, October 10, 2008. – 199 – denied responsibility, but widespread protests eventually forced the government to resign’.3 Two months after leaving office, Geir Haarde accepted some of the blame at a party conference: ‘Haarde apologised on Thursday for being partly responsible for events leading to the collapse of Iceland’s banks’.4 The Central Bank, for its part, made a discreet statement that resembled less of an admission: ‘The question of when it would have been right to intervene—and how—is extremely difficult to answer, however. No one has perfect foresight. Many lessons will doubtless be learned from the experience.’5 Comments gathered from Icelandic citizens indicate that they were trying to find ways to avoid bearing too much of the blame for their country’s financial collapse, despite its impact abroad. Sarah Lyall of the New York Times interviewed a secretary who had just lost her job and who failed to understand why the state—and hence its citizens— should have to pay for the imprudence of foreign savers and private bank directors: ‘We didn’t ask anyone to put their money in the banks’, she said. “These are private companies and private banks, and they went abroad and did business there”’.6 The editor in chief of Ice­ land Review alleged that Icelanders could not have known what was going on: ‘we were being assured by our government, bankers and even our Financial Supervisory Authority and Central Bank’.7 It was common for Icelanders to place the blame elsewhere—in this case, on a handful of people who acted carelessly: ‘As economist Vilhjalmur Bjarnason ... says, it was about 20 to 30 people who got themselves 3 Jon Danielsson, ‘Waking up to reality in Iceland’, BBC News, January 26, 2009. 4 Andrew Roche and Ómar Valdimarsson, ‘Iceland’s ex-PM apologises for part in bank crash’, Reuters, March 26, 2009. 5 Ingimundur Friðriksson, ‘The banking crisis in Iceland in 2008’, Sedlabanki.is, February 6, 2009 (italics added). 6 Katrín Runólfsdóttir, quoted by Sarah Lyall, ‘Stunned Icelanders struggle after economy ’s fall’, New York Times, November 9, 2008. 7 Bjarni Brynjólfsson, ‘Bright light to pitch-black night’, Iceland Review, vol. 46, no. 4, 2008. – 200 – into the debt that our nation of 300,000 now has to bear.’8 However, this sentiment found little sympathy of favour in the media outside Iceland. The first foreign accusations came from the United Kingdom. Gordon Brown was categorical: ‘Icelandic banks have collapsed, and Iceland ’s authorities must assume responsibility for that.’9 To force them to do so, the British and their European allies took the hard line, making any international aid conditional upon Iceland’s agreeing to fulfil its international obligations: ‘In a joint statement, the British, Dutch and German governments welcomed Iceland’s commitment to meet its obligations.’10 Although independent, the International Monetary Fund waited for an agreement between these nations before officially announcing...