Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: http://www.socialistparty.org.uk/issue/716/14439

From The Socialist newspaper, 2 May 2012

Capitalist crisis: 'Up to half of all Icelandic families are bankrupt'

Per-Åke Westerlund, From Offensiv, newspaper of Rättvisepartiet Socialisterna (CWI in Sweden)

Iceland's economy is growing again after the deep recession that struck in 2008. But the economic and political crisis is far from over.

During one week in October 2008, the country's three major banks collapsed and the stock exchange index fell from 9,000 to 14!

GDP (the total output of goods and services) fell by over 10% and the unemployment rate increased sevenfold. None of the 320,000 inhabitants could escape the blast.

The author, Haukur Ingvarsson, told the Danish newspaper, Information, about his grandfather: "First, he lost all his savings. Then he lost faith in the society he had so proudly been a part of building. And finally he lost his mind... Four or five months later he was dead."

Today, when economic growth seems to be coming back, the after effects of the crisis remain: "Up to half of all Icelandic families are bankrupt, many have stopped paying their bills and even people with good education and permanent jobs are under severe pressure," summarizes Information.

Devaluation

How can the economic recovery and the calm that seems to have replaced the big protests of 2008-09 be explained?

The main reason for growth is a gigantic devaluation. The Icelandic krona fell at one stage by 77% and is now at about 50% below its previous value. This has increased tourism and fish exports.

The krona's value reduction also increased the foreign debt. But the Icelandic government guaranteed only lenders in the country. "Much of the cost of debt restructuring was borne indirectly by foreign creditors, who took significant losses when the banks collapsed," says the International Monetary Fund (IMF) in its latest forecast (World Economic Outlook, April 2012).

In response to the many angry demonstrations and to avoid a total collapse, the Icelandic government decided on several temporary measures: an end to foreclosures, suspension of debt payments for housing, a rule that no one should have housing debt of more than 110% of the household's annual income, etc.

The cost of these measures and the state bank takeover was financed with loans from IMF of $10 billion - up to €20,000 per Icelander.

Negotiations of individual housing loans have subsequently led to reductions of debt and temporarily reduced interest rates. But these kind of negotiations have been completed for only 35% of all households.

Several of the measures have only been possible because Iceland has so few inhabitants. But it remains yet to be seen the degree to which Iceland managed to put households back on their feet, the IMF report concludes. "Significant problems remain", the Financial Times said in a recent analysis. The average household has lost 30% of its purchasing power since 2008. Household debt is still above 200% of disposable income.

Still, one-quarter of the reorganised bank debt is "bad loans". One reason for the debts continuing to be so high is that they are pegged to inflation, currently 6% annually, while wages have remained constant or decreased.

The political crisis is at least as great as the economic one. The Social Democrats and the Green Left formed a government when the old right-wing government was thrown out in elections in 2009. But today, both parties have halved their support compared to two years ago. The Social Democrats have fallen from 29% to 14% and the Green Left from 21% to 8%.

Hopes that the two parties stood for a different policy were dashed quickly. Instead, the new government turned to the European Union (EU), in the rest of Europe associated with the relentless cuts in pensions, public sector jobs and wages. This has opened up the way for the Independence Party, who sat in the previous government and now is leading in the polls.

Public opinion wants something new. "Almost half of respondents could not indicate how they would vote in elections to parliament today.

Of those responding, a fifth sympathised with a party that currently had no representation in Parliament," reports islandsbloggen.com.

Alternative

A new party, Unity, formed by Lily Mósesdóttir who left Green Left (critical for example, of the fact that household debts are not written down more), got above 21% in its first poll, but has since dropped to 6%.

The search for something new has led to a comedian being elected mayor of Reykjavik. A television show host leads the polls for the presidential election in June.

The outgoing president, Ólafur Ragnar Grímsson, is widely discredited since giving support to the banks.

The bankers, many of who have kept their private jets and fortunes, are still hated. "People in Range Rovers and black suits went in record time from being role models to be symbols of corruption and greed", noted Information.

Three lawsuits are also catching interest. Few believed that former prime minister, Geir H Haarde, would be sentenced for his role in the crisis.

As most Icelanders expected, he will face neither fines nor jail. He was only found guilty of failing to inform other ministers of his government and cleared on all charges of responsibility for the crisis.

During the trial, both Haarde and the witnesses only affirmed that they did everything they could to stop the crisis. But in reality, the state pumped money into the banks until the day of bankruptcy, as the Iceland blog pointed out.

The EFTA (European Free Trade Association to which Iceland belongs) court is suing the Icelandic government for claims by British and Dutch governments for British and Dutch losses in the Icelandic Icesave bank.

A third trial started recently, with bankers and their role in the crisis on the stand. Maybe it can provide additional information about the course of the crisis.

Shortly after the Icelandic crisis, the capitalist crisis erupted in a number of European countries and Iceland partially went into the shade. But the crisis is not over.

The need for socialist and genuinely internationalist answers are as great today as in 2008. Policies conducted within the framework of capitalism put the costs of crisis onto workers and ordinary people.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 2 May 2012:


Fighting the government attacks

Kick out the Con-Dems and end austerity

A strategy to stop austerity and bring down the government of the super-rich

Fight privatisation: Save our libraries

National Shop Stewards Network 6th annual conference


Socialist Party news and analysis

Rich list: The good times roll for the 0.00001%

Leveson exposes links between Tories and Murdoch

Them & Us


Socialist Students

NUS conference Support for left and for action


Housing crisis

Social dumping won't solve the housing crisis


Socialist Party feature

Don't accept the misery of austerity


Socialist Party workplace news

Unison leadership 'woefully inadequate' in face of cuts

Rotherham teachers stand up to bullying

Bilborough College Nottingham strike Action over five-term years

UCU joins 10 May strike - student solidarity needed

Workplace news in brief


Trade Unionist and Socialist Coalition feature

TUSC: the electoral alternative to the parties of the rich


Socialist Party campaigns

Thug attack won't stop anti-racist work

Socialist MEP discusses way forward for Tamils struggle

Sheffield marches against sexism and cuts


International socialist news and analysis

Capitalist crisis: 'Up to half of all Icelandic families are bankrupt'

Kazakhstan: Socialists jailed by regime


Environment and socialism

The government's fractured energy policy

Planning for the Planet


 

Home   |   The Socialist 2 May 2012   |   Join the Socialist Party

Subscribe   |   Donate   |   PDF  




Related links:

Iceland:

triangleInternational Panama Papers protests

triangleHuddersfield & Halifax Socialist Party: Iceland, the default

triangleIceland: 93% reject bankers' bailout

triangleIceland debt crisis: Make the 'dirt bags' pay!

triangleIceland: Devastated by global crisis

Capitalist crisis:

triangleLambeth Socialist Party: USA - Fighting Trump and the struggle for a socialist alternative

triangleRight wing attempts to use single market against Corbyn

triangleBuilding workers' struggle and the forces of international socialism

Capitalist:

triangleThe fight against racial discrimination is tied to fighting against capitalist austerity

triangleIMF helps cause inequality it slams

triangleCapitalism and human progress

Government:

triangleThe end of the Tories?

triangleNasty party imploding...drive out the Tories

Debt:

triangleNHS meltdown - fight the Tory cuts

Banks:

triangleHousing crisis: Corbyn's positive measures blanked by Labour's right

International

International

11/10/17

Catalonia

Catalonia: Workers can finish what Puigdemont won't

4/10/17

Catalonia

Solidarity with Catalonia - the people have the right to decide

4/10/17

Catalonia

Eyewitness: Irish socialist MP participates in events

2/10/17

Catalonia

Exemplary resistance by the people of Catalonia

27/9/17

Germany

Germany: Election results in political earthquake

27/9/17

Catalonia

Strike against Madrid's 'state of emergency'!

27/9/17

Germany

German elections: rise of the far right and right-wing government will provoke resistance

27/9/17

France

French Labour reform protests

25/9/17

Catalonia

Catalonia: Student strike called

20/9/17

Myanmar

Brutal repression of Rohingya people sparks massive humanitarian crisis

20/9/17

Catalonia

Solidarity with Catalonia in the Spanish state

15/9/17

Germany

Berlin hospital strike

13/9/17

Korea

Korean peninsula: is nuclear war likely?

13/9/17

Students

Interview with leader of students' union in the Spanish state: "When we fight, we win!"

6/9/17

US

Hurricane Harvey: A tragedy made far worse by capitalism

triangleMore International articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle13 Oct The end of the Tories?

triangle11 Oct Nasty party imploding...drive out the Tories

triangle11 Oct CWU fights court attempt to stop national strike

triangle11 Oct The fight against racial discrimination is tied to fighting against...

triangle11 Oct Catalonia: Workers can finish what Puigdemont won't

triangle6 Oct Boeing bust-up threatens thousands of skilled jobs

triangle4 Oct The nasty party turns on itself... but the Tories must be driven out

More ...

triangle17 Oct London: TUC lobby & rally; and London march

triangle18 Oct Warrington & St Helens Socialist Party: 1917-2017; the October Russian Revolution

triangle18 Oct Hackney Socialist Party: 100 years ago - the Bolshevik-led revolution

triangle18 Oct Tower Hamlets Socialist Party: Capitalism in Crisis - is Corbyn the answer?

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

Archive

Archives:

October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Legal

SP RSS feed RSS

Platform setting: = No platform choice

V2