After the dust began to settle last year — after the banks failed, the currency collapsed, the stock market crashed and the government fell — the dazed inhabitants of Iceland woke up to another unpleasant problem: They owed, it seemed, some $5.3 billion to more than 300,000 angry people in the Netherlands and Britain.
These were the customers of Icesave, a now notorious online retail branch of the Icelandic bank Landsbanki, which went bankrupt in October 2008 along with 85 percent of Iceland’s banking system. The British and Dutch governments reimbursed their citizens, but then demanded that Iceland repay the money, the equivalent of $65,000 per household here, plus interest.
To put it in perspective, it is as if American taxpayers were being forced to pay $5 trillion (plus interest) to reimburse customers of the Japanese branch of a failed private American bank, said Magnus Arni Skulason, the head of InDefence, a group agitating for a better deal.
It isn’t is as if the average Icelander didn’t benefit somewhat from influx of money which arrived during the nation’s heyday as a center of international finance. But, I somewhat suspect that the movers & shakers who took risk which yielded massive fortunes are somewhat more comfortable than the average Icelander now. Yes, their paper wealth is not what it was, but they were living far above the median consumption rate anyhow. There is austerity for the masses, and “austerity” for the elite.
There don’t seem any good solutions here. The elites of Iceland were either crooked or stupid, or some combination of both, during the years of high rolling. Now they’ve left their nation holding the bag. And this is Iceland. A tiny Nordic nations which is (was?) characterized by clean government and an efficient elite.