Icelandic Financial Crash

Icelanders would prefer if this were all just theater and that they were sleeping, perhaps dreaming. But it is a harsh reality. The financial collapse that Iceland experienced has etched itself so deeply into the national spirit that the Reykjavik City Theatre decided to stage an unusual performance: they will read the entire report on the causes of the crash in continuo to the audience.

The reading began on Monday, the same day the report was published, and will likely last until Friday, with 45 actors taking turns until they read all 2000 pages to the end, word by word. Members of the theatre explained that they decided on this because the ‘report will be comprehensive and it is likely that the media will explain it from different, opposing viewpoints, so the troupe decided to read the report aloud to the audience, from start to finish.’ They invite the audience to listen attentively, and it is also being streamed online (www.borgarleikhus.is).

The report, after 15 months of work, was compiled by an independent commission appointed by the Icelandic parliament to investigate how everything happened and how the three largest banks – Landsbanki, Glitnir, and Kaupthing – turned the entire country into one huge hedge fund and then led it into a zone of economic disaster. The three-member commission found that the seeds of the crisis were sown long before the crash itself, when, following government liberalization of the financial sector, the banks embarked on an adventure to turn this small Hyperborean country into a global financial center. In just 2005, the three major banks issued around 14 billion euros in various foreign financial instruments. One of the commission members described the scale of these operations as if American banks had issued instruments worth 14 trillion dollars, considering the size of the national economy.

Refinancing was not a problem as long as the global financial markets were spinning in the same rhythm. By 2007, the banks were forced to seek other sources, so the Icelandic banks turned to foreign deposits that attracted high interest rates. The biggest victims outside of Iceland itself became British savers, which also became a political issue between the two countries. During the seven years leading up to the crisis, the three mentioned banks grew as much as 20 times, and when the bubble burst, they took the entire Icelandic economy down with them. The report also points to many criminal elements in the behavior of bank leadership in the years leading up to the crash – manipulating stock prices, dubious loans, and other actions that could not be classified as proper business practices – so the outraged and frustrated public expects criminal prosecution of those responsible. (Davorka Zmijarević)