by Deena Stryker

An Italian radio program’s story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. We may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.

As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here’s why:

Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatised, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many UK and Dutch small investors. But as investments grew, so did the banks’ foreign debt. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalised, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.

Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)

In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.

But Icelanders didn’t stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)

To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.

Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.

They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.

That’s why it is not in the news anymore.

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Courtesy of nod to Bella Caledonia for making us aware of this article)


2011-08-27 07:35

please enlighten us all.
Exactly when did Iceland join the European Union ?

this little-known member of the European Union fell back into oblivion


Online Editor
2011-08-27 07:48

The country applied to join in 2009 but, as you point out, this is yet to be ratified and thus it is not yet a full member although it has participated in talks and contributes financially to the EU.
2011-08-27 08:32

Online Editor,

Forgive me for saying so, but I have come to expect some pretty factual arguments or opinions being raised through the Newsnet article. This one seems to have fallen at the first hurdle. The “grapevine” site seems to easily put this article out of its misery. Could we have a second, more considered and factually correct article?

As you mention the overall thrust may be valid. But you need now to make it so.


Mad Jock McMad
2011-08-27 07:36

For the Icelanders’ real view and a bit of balance I recommend reading:…/…

Its from the horses mouth ….

[Online Editor – thank you for this link. We have corrected the typos (IMF) but feel that the general thrust of the article, notwithstanding the challenges to some of the figures and other assertions, is still valid.]

2011-08-27 07:52

Iceland is not in in the European Union.

It would read better and be more inclusive to write about the Netherlands and United Kingdom, rather than Holland and Great Britain.

Otherwise an interesting piece.Quoting Mad Jock McMad:

For the Icelanders’ real view and a bit of balance I recommend reading:…/…

Its from the horses mouth ….

2011-08-27 15:20

As far as I know, they don’t have reindeer either. Many people seem to mix up Iceland and Finland. After moving to Finland, I had people asking me about the hot springs (err, no, that’s Iceland). And when I graduated from Helsinki University, my mother informed the local paper, which apparently managed to locate the capital of Finland in (you guessed it) Iceland. Ah well, some Finns think Scotland’s in Ireland…which I prefer to the more common alternative.

2011-08-27 07:48

It seems to me the Icelandic government of the time were negligent in allowing some of their citizens(banker s) to fleece foreign nationals.But I dont think the whole of Icelands population can be held to account for the actions of a few conmen.If a Dutch or Brit person chooses to send their money to a foreign country,thats up to them.They assumed it was safer than sending money to a scammer in Nigeria.I wouldnt mind going for a holiday in Iceland,just to show some solidarity.Is a pint affordable these days?
2011-08-27 15:22

Were the ‘Icelandic’ banks not actually quoted on the London stock exchange and subject to UK regulation?
2011-08-27 19:13

as far as I can recall, the Icelandic banks were given a clean bill of health by the FSA, and this encouraged some UK citizens and local councils to invest in them.

OT the FSA report on the RBS collapse has still not been published, three years after the event.


2011-08-27 07:56

Btw wasn’t quoting Mad Jock McMad: am using an iPhone and it can be a real faff at times!
Scottish republic
2011-08-27 08:02

It looks ver much to me as if the Icelandic people said they wouldn’t pay the debt and they didn’t – good for them.

Brown, in his imbecilic state of semiconsciousne ss could have let the banks fold, started up a nationalised bank from scratch and let the bankers take the hit but he didn’t and they got bonuses instead.

J Wil
2011-08-27 21:57

I got the impression that the Irish nearly did the same thing. They will probably be sorry they didn’t.

John Souter
2011-08-27 08:17

I think there’s a touch of fantasy – the isle of sanity emerging from a toxic sea – in this article.

But you have to ask yourself why we’re all so desperate to believe it could have an underlying truth, a nuance to goad towards purpose.

Perhaps its because more or even a modified version of the same feral financial paradigm is just too awful to contemplate – but it’s what we are being offered?

2011-08-27 08:17

I think some of the figures used in this article are slightly suspect. Perhaps it’s billions as opposed to millions ?.
Nevertheless, enlightening.
The dubious moves to ‘socialise’ debt not incurred by the people but a millstone round their neck for generations. High unemployment, low to no growth, stagantion and uber rich bankers, laughing in the face of the people, all the way to another bank.
Stuff of revolutions folks ?. Nothing less.
That’s why the UK governments reaction to revolt is to call for draconian laws and state reaction, hardly constitutional.
Ah but, there is no constitution is there and no rights enshrined in law.
High time a constitution arose for Scotland that took us as a nation, forward.
Those who argue to delay are not the type of people I agree with. The fundamantalists who want to push ahead now rather than later are who I side with !.
Robert Louis
2011-08-27 08:27

A constitution for scotland …..zzzzzzzzzzzzzzz ! Is that what they call flogging a dead horse’?


Here’s the news, you don’t need a constitution to enshrine rights in law. Think about it.


Robert Louis
2011-08-27 08:22

Well done Iceland. If you had not followed this course, you would have been treated just like Greece.

I still cannot fathom why ANY country’s people have to take on debts created by privates businesses called banks. Greece, Spain, Italy and Portugal should all do the same, instead of what their cowering brainwahsed politicians are doing.

If a private business goes bankrupt do taxpayers pay their debts for them?? NO, of course not, so why should we pay the private Banks debts for them, whilst they carry on enjoying the good life. Why?

Oh, and have the banks been broken up so they are much smaller??? No, not one bit of it. The ruling elite money men who feed from our hard work wouldn’t tolerate it. The banks run the world, and they are not going to give up such control easily. Every time a Government or the EU mentions tough action on banks, the bankers pull the market down – it doesn’t happen just by chance.

Let the banks fail, then take them under state control. Simple really.

2011-08-27 19:16

RL you should add the UK to that list.

2011-08-27 08:34

Oh dear, not Newsnet as well.

Suckered into printing this piece of shocking, shoddy and downright sloppy journalism. The comment threads on Bella and SCASIS point out the terrible factual errors that run through the piece.

They also show the basic thrusts of the article have been shown to be untrue

There is a draft new constitution, but its yet to be adopted by the government, and no sign that it ever will.

Iceland DID adopt the IMF austerity plan and the public sector has been hit by it. The Icelandic Government thanked the IMF for their help when they left the country yesterday!

If this had piece had been – say – posted on Labourhame, most of us would have taken great pleasure in dissecting the errors to death, burying it, and dancing on the grave.

Iceland is a great example of how localism and self determination can be applied to the sort of first world, egalitarian, remote rural, edge of Europe, but rich in energy resources economies personified by Iceland, Northern Scotland, and the North and West of Scandinavia. Living as I do in the far North of Scotland, and working with Icelandic colleagues on projects that look at how rural peripheral regions can maximize outputs from social and community assets, as well as physical resources I have a huge admiration (and envy) of Icelandic societies bottom up localism. A welcome foil to an urban obsessed Scotland, living in the shadow of post industrialisati on.

But this piece was and is still a shocking piece of shoddy, sloppy and lazy journalism, where the author seemed to have been so transfixed by the coolness of the concept not to do even the simplest of sense – or factual – checks.

I’m afraid that whether we like it or not the pro independence online media has to be both self policing, and have obvious higher standards the MSM if we are to retain any credibility and impact in the next few years. This very poor piece does Newsnet (or Bella) no credit at all.

2011-08-27 08:36

Interesting piece, and good to hear that Iceland is kicking against the pr*cks. However, sorry to join the nitpickers, but I’m not sure what is meant by:

‘In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent.’

That implies Iceland’s ‘debt’ has gone from 200xGNP to 9xGNP which I assume is not the case.

2011-08-27 09:03

Whether or not the article contains factual errors, it raises a point that has puzzled me.

The banks were businesses owned by their shareholders. They went bust through poor business practice. In most cases when that happens the shareholders lose their investment, and occasionally someone comes along and buys the business out of administration and off they go. Apart from the shareholders, creditors usually lose money too as any cash left is stolen by the administrators and liquidators to line their own pockets.

Why uniquely in the case of the banks is it considered OK to make the public take over the debts of private companies? Why not just declare the baks bankrupt and nationalise them with no compensation to shareholders? Why are we in effect paying off the gambling debts of others? Why have we not had a revolution in this country with Gordon Brown being dragged out of Downing Street and tarred and feathered? I can only assume it’s because most people don’t really understand what has happened. Think about it – we are paying someone else’s gambling debts and to make matters worse they are still gambling and still being paid massive bonuses win or lose. We have all been robbed and we are being made to reward the thieves.

2011-08-27 09:33

Exactly the questions that bother me! Capitalists/neo Liberals bump on about market forces,yet don’t seem to think that these same market forces should apply to the banks?

Scottish republic
2011-08-27 10:09

That was my point earlier really.

Brownie could have passed a law stopping mortgage companies from foreclosing on non-payers; nationalised the banks BUT NOT THE DEBT and provided the money to account holders from the state while allowing businesses to borrow as before the crash.

BUT he preferred to kiss the buttocks of the markets and financiers.

Yes, expensive, sluggish but much less expensive and much less sluggish than the bail out.

My Xmas wish (because that’s a time to really fantasise) is a banker’s bonus – but I’d need to crash a bank first to get that, wouldn’t I, so I guess it’s no then.

2011-08-27 14:39

As pointed out above, the article is blown out of the water in the first paragraph with a glaring factual error.

Might be worth checking the facts from an independent source before publishing.

Saltire Groppenslosh
2011-08-27 16:53

Slightly off topic but concerning a story that has not been aired on our westminster TV stations; I sometimes watch russia today. I take a large glass of “believe it” whilst I watch but one story hit a nerve. There is an old ex-serviceman who has been using his right of free speech (as in speakers corner) to mouth off at the judiciary in london about corruption amongst the ranks of the legal hierarchy and government. It seems they’ve had enough of him and have taken action against this old salt. Has anyone else seen this and what has he been shouting to get him in such soapy bubble? Any takers?
Andy Anderson
2011-08-27 17:26

This is a very important story. We must take careful note of this resistance to the multi-national capitalist grip on the world economy, and the need to break free or we will never have real independence.
2011-08-27 18:10

That actually brings tears of hope to my eyes…only to be cruelly blown away after…
2011-08-27 19:37

Well done Iceland!

For those who can’t bear to see the actual story because of the errors in the referenced story, here’s another one from Bloomberg –…/…

The continuing narrative is that we’re in this mess because there was no other way out of the ‘financial crisis’ – the Icelandic route shows that clearly there was.

Perfect? Like the article, no.

But surely the actual point of the article *as evidenced in its title* is that Iceland’s alternative approach to the ‘crisis’ is almost completely absent from the media of those countries whose populace failed to check the natural inclination of their politicians to submit to ‘the markets’.

2011-08-27 20:19

How can someone write about Iceland and not mention fraud? The 2008 world financial crisis was not an act of God. It was the result of massive fraud. The “pure neoliberal regime” led to what Professor Bill Black calls the three Ds: deregulation, desupervision and defacto decriminalisati on and ended with the impoverishment of Iceland. There were indications before 2008 that something was not right: for example…/……/…

For more information, read Bill Black’s book “The Best Way to Rob a Bank is to Own One” or watch Charles Ferguson’s Oscar winning documentary “Inside Job”

If readers want to know how the investigations into fraud are going in Iceland, try Sigrun Davidsdottir’s blog at

2011-08-27 21:44

I doubt you will see any official comments from the SNP about Iceland. The fingers have already been burnt once. People want to know what the SG is going to do, not what others are doing.
2011-08-27 22:54

You’re right that we probably won’t see any comments from the SNP about Iceland.
But I think that if what has gone on in Iceland was given fair coverage in the media, comments might have been at least more likely.
The idea that somehow the inclusion of Iceland as part of a list of comparable ‘small’ nations doing well in the world is unacceptable because it (like almost every other western economy) has been co-opted by the global financial ‘system’ is just silly. Let’s just ignore what they try to do about it, eh?
But that derisory attitude can easily be given credibility as long as the media decides not to fairly cover Iceland’s story.
You’ll notice there was no shortage of analysis covering Ireland’s slow bending of the knee to the ‘markets’ and the IMF.
Little coverage of Iceland (except to vilify), and none whatsoever of the fraud and fraudsters who did it, and the governments who kow-tow to them.

Governments have a hard time presenting things people find unexpected. The more options the public are familiar with, the easier it is for Governments to choose policies to place before them. If everyone says there’s only one way, and there’s no evidence for any other ways, it’s hard to convince the public of another way.

tl;dr –
If there was coverage of Iceland’s recent choices, the SG might be less inclined to play along with the silly idea that Iceland is a bad country to compare yourself to.


2011-08-28 07:26

I think that Newsnet would be well advised to withdraw this article in order to maintain its usual high standards as the article is riddled with factual errors.

It appears the author of the article Deena Stryker has said since writing the article “I am the culprit in the Iceland story: I did not check the Italian radio story before adapting it in English. Lived in Italy six years, should have guessed Italian journalism still requires ‘trust but verify’. Looking for correspondents to collaborate on book proposal requested by publisher.”


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