2008-11-18 11 h 27 :: monstersandcritics.com :: Les Islandais sous le choc après la crise financière

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Icelanders in shock after financial crisis (News Feature)

Les Islandais sous le choc après la crise financière

Business Features

By Thomas Borchert Nov 18, 2008, 11:27 GMT

Reykjavik/Dieburg - Karlheinz Bellmann went to Iceland to find out what had happened to his savings of 110,000 euros (138,000 dollars), missing since the collapse of the country's Kaupthing Bank.

Four days later, on his way back to Germany, the father of four had other matters on his mind: 'What can one do to help the people here?'

Crying fathers who told him how they had lost their jobs, how their wives had experienced the same fate and how they had lost their homes left a strong impression, just as the cynical reactions among Icelandic bank executives at the bar in the Grand Hotel: 'Of course we played Monopoly with the country,' they told me. 'And we had fun. Most of the time it went fine.'

Finally, Kaupthing and the other major banks Landsbanki and Glitnir reached the end of the line and the 320,000 inhabitants of the Atlantic island faced national ruin.

Prime Minister Geir Haarde has estimated that the aggressive expansion of the banks has resulted in a 19-billion-dollar mountain of debt. That equals two-and-a-half state budgets or twice the gross domestic product.

The collapse of the financial sector and large layoffs have since October resulted in complete standstill in the construction industry, the first sign of a long downturn. Massive hoarding of goods at supermarkets and an inflation rate of 16 per cent are clear indications of the dire prospects facing the ancestors of the Vikings.

In return for a 2.1-billion-dollar loan the International Monetary Fund (IMF) has demanded that the currency, the krone, which has been weak for the past year be allowed to float freely. That would further reduce the currency's value and make imported products for ordinary consumers even more expensive. A kilo of imported sugar will become a luxury product.

The government has said that a 20 per cent inflation rate and an unemployment rate of over 10 per cent will now have to be reckoned with. Until October, Iceland's 'normal' unemployment rate was 1 per cent.

'Sturdy men broke down in tears in front of me and said that the future for Iceland is like a black hole, and that one has to start back in the Stone Age,' Bellmann said.

Islanders fear that Iceland's pension funds could be raided. They are practically the only possibility of getting funds without further running-up foreign debts.

The anger expressed by ordinary citizens has been limited, so far. More and more people gather each Saturday in front of the parliament in Reykjavik.

Some of the 6,000 protesters at a demonstration on Saturday threw rolls of toilet paper at the building where a few months earlier the premier had declared that the Icelandic banks were robust and the country's finances were healthy. Now Haarde's party has made an about turn concerning membership of the European Union,

Above all, there seems to be an mood of collective shock.

'You have the feeling that the whole country has lost its self-confidence,' publicist Oskar Gudmundsson said.

Bellmann expressed it differently: 'It seems like on the Titanic, where people continued to dance even though the ship had hit the iceberg.'

Staff at Kaupthing in Reykjavik have assured Bellmann that he is likely get back his assets.