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Iceland: a nation in revolt

The economic crisis has hit some nations especially hard. Stuart Miller looks at events in Iceland where the collapse of the banking system has led to angry protests.

The dramatic events of recent months in Iceland may have had relatively little mention in the UK media yet they provide one of the clearest indications in recent years not just of the failure of neoliberal capitalism but of the potential for ordinary people to resist and reject those who rule over them and the dominant ideology they seek to impose. In what is perhaps a sign of what we may see in other nations should the crisis continue and intensify the government was forced to resign after months of mass demonstrations outside parliament which culminated in the building being brought under what could be described as a state of siege by thousands of protesters on the 22nd of January. New elections have been called for April and the people of Iceland have been forced to rethink their country’s direction both socially and economically for the years ahead.

Economic background to the crisis

Iceland for the last 19 years has been ruled by governments led by the conservative Independence Party, first under Davíð Oddsson and then Geir Haarde. Davíð Oddsson who was Prime Minister from 1991 until 2004, and is now the most hated man in Iceland, is widely seen as the architect of the Thatcherite policies which allowed the financial sector to emerge out of nowhere, becoming the source of the country’s new found wealth. The banks were privatised, taxes were cut back and regulations slashed. In addition Iceland, unlike its Nordic neighbours which have largely maintained relatively high and progressive personal tax levels, has adopted a system of flat taxation (currently at 36% of people’s income), being one of the few countries outside Eastern Europe to do so. Corporation tax has also been steadily reduced and currently stands at 18%.

In some ways the Independence Party’s neoliberal policies appeared, economically at least, to have been a success and in GDP per capita terms Iceland became, for a number of years, the third richest European nation after Luxembourg and Norway. A wealthy class with their luxury apartments and enormous cars emerged and a culture of aspiration was endlessly promoted among ordinary working and middle-class Icelanders. Yet the foundations of Iceland’s economic miracle had always been shaky and much of the country’s visible wealth was bought with borrowed money. The deregulated banking sector which was at the forefront of the country’s new economy had been quickly building up enormous debts which by last year had astonishingly reached ten times the country’s total GDP.

Disaster strikes

The potential for disaster though had been completely ignored by those in a position of power and it wasn’t until the collapse of the bank Glitnir on the 29th of September 2008 that people started to become aware of the scale of the problem. Within the space of a just a few days the krona then plunged by around a third and soon afterwards on the 7th of October the second major bank Landsbanki went into administration. Part of Landsbanki was the internet savings scheme Icesave and when withdrawals by British savers were restricted Gordon Brown outrageously used anti-terrorism laws to freeze Icelandic assets in the UK, a move which some say contributed to the collapse of the last remaining bank Kaupthing days later.

The effects of the crisis were very quickly felt by ordinary people as workers started getting laid off, inflation soared to 18% and people have lost their homes and cars. While unemployment was minimal back in September it is now estimated at over 7% and it is believed that this year the economy could contract by as much as 10%. As a result many families have started relying on charity food aid and the welfare system has been overwhelmed by the numbers of people seeking state assistance. Icelanders have understandably been outraged over the situation and at the years of recklessness at the hands of their government and banks which directly led to it. A popular movement of resistance has begun to emerge and from October onwards protesters had gathered regularly in their thousands outside parliament in Reykjavík.

People take to the streets

Repeatedly those at the top have refused to accept any responsibility, assuring people that everything was fine, that the banks were sound just days before they collapsed and, once they had, that it would be no time before the economy would pick up again. Perhaps unsurprisingly people have seen through the lies of the powerful and political activism in its various forms has flourished. One of the organisations which sprung up, and which was involved in the protests outside parliament, is the grassroots campaign group Raddir fólksins (Voices of the People) with the singer and activist Hördur Torfason one of the people who helped get it started. Outraged at the behaviour of the political and economic classes who bankrupted his country he tells, in an online interview, how at the beginning he went to parliament square with a megaphone and talked to and listened to the views of ordinary people. From there a popular movement was built up and the protests became a regular occurrence with the aim of forcing those in a position of power to accept responsibility and resign - namely the government and the boards of the Central Bank and Financial Services Authority. At the height of the demonstrations in Reykjavík as many as 10,000 people were in attendance, a significant figure for a country with a population of just 300,000.

On the 20th of January the situation on the streets suddenly became more dramatic as up to several thousand people clashed with the police who used pepper spray and made over 30 arrests. Outside parliament people banged pots and pans, blew horns and made as much noise as possible to disrupt its first meeting of the new year, staying on through the night and lighting bonfires to keep themselves warm as well as burning the large Norwegian Christmas tree. The following day Prime Minister Geir Haarde’s car was surrounded and pelted with eggs and snowballs and thousands surrounded government buildings which had red paint thrown over them. On the 22nd police used tear-gas for the first time since the anti-NATO protests in 1949 to disperse people from around the parliament as rocks, paving stones and bottles were thrown at the building and at the Prime Minister’s office, smashing windows and injuring several police officers.

According to the Icelander Eiríkur Bergmann writing in The Guardian “The word ‘revolution’ might sound a bit of an overstatement, but given the calm temperament that usually prevails in Icelandic politics, the unfolding events represent, at the very least, a revolution in political activism”. A people who, like most Europeans, were once politically apathetic and rarely took to the streets for any reason have became angry and engaged with what is happening around them. A sense of protest can be felt right across Icelandic society and those who have taken to the streets can be found in all age groups and walks of life. It is not just the poor who have suffered from the crisis but also the professional and middle classes who have faced large numbers of job losses and risked losing their homes and cars due to the enormous levels of personal debt. Icelanders have also used new information sources to bypass the mainstream media and there has been a surge in political blogs and online activism.

Government falls

After the three days of intense protests Prime Minister Geir Haarde announced on the 23rd that a new election would be held in May and that he had been diagnosed with cancer and didn’t intend to continue beyond that point. However the protesters wouldn’t go away until their demand that the government resign had been met. From the beginning of the crisis opposition within the social-democratic Alliance to their coalition with the Independence Party had been growing considerably and when the party’s Reykjavík branch voted in favour of pulling out on January the 22nd it seemed likely that their days of participation in the government were numbered. On the 26th of January the party officially terminated the coalition after the Independence Party refused to sack the Central Bank’s board and agree to a cabinet reshuffle. Geir Haarde shortly afterwards called for a national unity government but this was ultimately rejected by the Alliance and Left Greens when, after several days of negotiations, they announced their intention of forming a new minority government together which would govern until a new election on the 25th of April.

The new government’s programme, announced on February the 1st, includes the intention to alter the constitution so as to make reference to public ownership of the nation’s resources and to allow greater opportunity for the use of national referendums. Also included has been the cancellation of the Act giving generous pensions to Ministers and MPs, measures to stop people losing their homes and assurances that the needs of ordinary people will be taken into account as much as possible and the welfare system protected. One of the new government’s first decisions was to call for the resignation of Iceland’s three central bank governors, including its Chairman, former PM Davíð Oddsson. Yet in a show of contempt for the Icelandic people Mr Oddsson has refused to accept all responsibility and repeatedly ignored the requests of the new Prime Minister Jóhanna Sigurðardóttir for him to stand down.

The Left Greens

For such a small country Iceland has a surprisingly diverse political scene. On the left there is the Left Greens who were founded in 1999 as a more radical alternative to the merger of the Social Democrats, People’s Alliance, National Movement and Women’s List into today’s centre-left Alliance. From the beginning they have placed a strong emphasis on environmental issues, gender equality and national independence from organisations such as the EU and NATO. In the first two elections they were able to gain 9% of the vote, growing in 2007 to 14% on the back of a strong campaign against the construction of several large aluminium smelters, something the government of the time was keen to promote. With 3,000 members and a popular and respected leader, Steingrímur Sigfússon, they have been in a strong position to represent themselves as the main political opposition to the status-quo as neoliberal capitalism becomes irreparably discredited in the eyes of many Icelanders.

In a number of the opinion polls conducted over the last few months the Left Greens have emerged as Iceland’s most popular political party and they will be trying hard to hold on their strong position in the run up to the election on April the 25th. Support for the centre-right Independence Party has naturally been badly hit by the crisis and it appears likely that, for the first time in decades, parliament could be dominated by the left. With the social-democratic Alliance and Left Greens keen to continue their joint coalition both parties will be competing to gain the most support and therefore be in the strongest position to lead the next government. Interim Prime Minister Jóhanna Sigurðardóttir from the left-wing of the Alliance, and the country’s first female and openly gay PM, is someone who also enjoys a high degree of respect among Icelanders, being seen as someone likely to stand up for the disadvantaged, and her brief time as leader of the nation has helped her party regain much of its popularity in recent weeks.


A likely area of contention for any new government and one of the issues where the strongest disagreement exists between the Alliance and the Left Greens is Iceland’s proposed EU membership. After the crisis initially set in and particularly with the rapid collapse of the