Translated material
To prison for the crisis
Iceland wants to try ex-prime minister
Iceland is experiencing a creative boom. First, it "blessed" the world with a disproportionate amount of toxic banking assets . Then - the eruption of a volcano with an unpronounceable name (economists joked that the bankrupt country had bequeathed its ashes to be scattered over Europe). Now the country can give the world a precedent: the conviction of a national leader under whom an economic crisis occurred.In principle, political leaders should not renounce prison. Conviction of a national leader for corruption, reprisals against the opposition, war crimes, and massacres ceased to be a rarity by the end of the twentieth century. But the trial of the leader of a democratic capitalist country who failed to implement counter-cyclical economic policies will be Iceland's original contribution to economic policy and law.
By a majority vote (33 to 30), the Icelandic parliament decided to prosecute ex-Prime Minister Geir Haarde. The case will be considered by a special court created for such cases in 1905 and never convened. During the same vote, parliamentarians decided not to prosecute the former ministers of finance, economy and foreign affairs.
Haarde was Prime Minister from 2006 until early 2009. In the conclusion of a committee of legislators, quoted by Bloomberg, the ex-prime minister is accused of violations of the law committed in February-October 2008, both intentionally and due to negligence. The committee was formed after a commission investigating the causes of the crisis concluded that the government, the central bank and the commission that regulates financial markets were negligent in missing the approach of the crisis. They did not force the banks to normalize their balance sheets. This turned out to be a drama for the country, since bank assets before the crisis exceeded the country's GDP ten times.
When the major Icelandic banks (Kaupting, Landsbanki, Glitnir) went bankrupt in October 2008, creditors were left with $86 billion in liabilities, and the state became embroiled in a protracted scandal with the UK. There, Icelandic banks, thanks to high interest rates, attracted a lot of funds for deposits. At the same time, local residents believed that the guarantees for deposits in these banks were the same as for deposits in British banks. The dispute with Britain and the Netherlands over who will compensate Landsbanki depositors for $5.1 billion in losses is not yet over.
“There is a great danger that the Icelandic economy - in the worst case - will fall into the same whirlpool with the banks, and everything will end in national bankruptcy,” Haarde said in October 2008.
Of course, it is possible to understand Icelanders. Before the crisis, the country enjoyed cheap loans and a strong influx of direct and portfolio investment. We also had to pay for this pleasure together. The stock market fell by more than 90%, household incomes by 20.3%, the crown's exchange rate against the euro more than doubled, and against the dollar doubled, and GDP fell by 5.5%. Inflation jumped to almost 20%. External debt (in kroons) tripled, exceeding GDP nine times.
It is obvious to the average person that someone must answer for these outrages. Moreover, before the crisis, Icelandic oligarchs and politicians close to them led a playboy lifestyle, which is not at all typical for Europe, but is very reminiscent of Russia. Our countries turned out to have a lot in common: profitability unknown to developed countries and the ability to quickly make gigantic fortunes, inequality, a frantic influx of foreign capital, the rapid inflation of bubbles in different markets. As in Russia, oligarchs appeared in Iceland. Having become targets of criminal prosecution, some of them left the country.
Icelandic politicians have already been punished - twice. They (probably forever) lost power. The reputation has also been lost - it’s better not to show up on the street and in local pubs. Of course, the feeling of revenge says that this is not enough. The signs of an approaching crisis were too obvious, the Icelandic bubbles were too large and colorful. Moreover, symmetry is needed. Top managers of companies are responsible for their mistakes, for misinforming clients and investors, for distorting reporting, but officials are not. But such responsibility can be introduced after a clear “guide” appears, a guide describing what governments and national banks should do to mitigate cyclical crises. The IMF, leading governments and national banks of the world are now working in this direction, but clarity is still far away. So Haarde will apparently avoid prison. But fate may be less kind to future governments that make economic mistakes.