Inthe 2008-2009 financial crisis Iceland received an unfortunate hit which was famous for having led to the jailing of many of the country’s most powerfulbanking executives. Now the IMF say that Iceland is recovering very well, “without compromising itswelfare model,” which is inclusiveof education as well as universal healthcare.
Whereas in the US larger than life banking institutions havebeen repeatedly met with bailouts at the expense of the taxpayers, Iceland isdemonstrating that this model is not the way to go. If the countries stays course it will be thefirst in Europe to surpass the overall financial health of its previous peakbefore the economic crash.
Whereas in a similar situation US banking corporations wererescued, Icelandic banks were allowed to crash and burn, defaulting on about$85 billion in loan. This of coursenaturally led to the prosecutions and convictions for the criminal andfraudulent actions of banking executives.
“Why should we have a part of our society that is not beingpoliced or without responsibility?” special prosecutor Olafur Hauksson said after Iceland’s Supreme Court convicted three bankers andsentenced them to between four and five and a half years in prison each. “It is dangerous that someone is too big to investigate—it gives asense there is a safe haven.”
Indeed, the safe haven Hauksson refers tois the very definition of the oligarchy, a monopolized power structure thatacts above the say of the people. Hauksson was previously a police officer in asmall town but took the responsibility as a special prosecutor because theposition needed to be filled and the investigation needed to be done.
In order to facilitate the movement of investigations into thebanking fraud, the Icelandic Parliament decided to reduce secrecy restrictionso that investigation could take place without the need for an official courtorder.
Out of 7 convictions so far, 6 have landed in the Supreme Courtin Iceland and five of those six were scheduled to appear in the top court, asof February. There are 14 more casesthat seem likely candidates of prosecution. This is an incredibly start contrast to what happened here in Americawhere there was little to no transparency and as there has been no action takento hold the banking institutions accountable, the resentment in the Americanpeople remains.
In May, the banks pled guilty to manipulating global currencyand interest rates and as a result were issued a monumental $5.7 billion fine.As Iceland shifts out of the banking crisis, the strength and resilience oftheir economic health will be put to the test as freezes on capital and foreigninvestments will be lifted, allowing investors to move their money from Icelandicinterests if they so choose.
The financial minister of Iceland took note of the possiblefuture outcome of such a scenario and decided to take action. It has been announced that a staggering 39%tax will be enforced for anyone who chooses to remove capital from Icelandicinvestments as a protection measure for the brand new Icelandic economy as itrecovers.
“The danger is capitalflight and a consequent fall in the value of the krona,” explained Universityof Iceland economics professor, Thorolfur Matthiasson. “That would be tantamount to October 2008, bringing back badmemories for ordinary people and possibly making most businesses unsustainabledue to balance-sheet problems.”
Risk, Returns, and balance will always be elements of thefinancial sphere of a country, but having the due force within the justice systemto hold corporate banks accountable certainly lends a strong agent of balanceto the equation.