Business News

Iceland recovers from crisis - but bitterness lingers

By Thomas Borchert Oct 12, 2011, 2:06 GMT

Copenhagen/Reykjavik - Financial experts may be happy, but ordinary citizens are furious with Iceland's politicians as the country recovers from its financial collapse.

Three years after a financial crisis brought down the island's banking system, opinion remains polarised, with some people even pelting politicians with eggs and yoghurt.

'The fact that thousands of people are still giving voice to their anger is a wake-up call,' President Olafur Ragnar Grimsson said on opening parliament over the weekend.

Minutes later, he was fleeing missiles thrown by some of the 4,000 demonstrators outside.

The protesters included many fathers and mothers unable to pay off their mountains of debt since Iceland became the first European country to effectively go bankrupt, in October 2008.

Protests did not prevent Prime Minister Johanna Sigurdardottir from presenting Iceland's economic position as favourable when addressing the Althing, the name of the Icelandic parliament.

Sigurdardottir did have reasons for optimism. The state budget will be in surplus by 2013, and the Icelandic krona has stabilized after falling sharply in the wake of the crisis.

Inspectors from the International Monetary Fund (IMF) were full of praise when they looked into the island's affairs in the summer, saying Icelanders had fought their way out of the financial swamp much quicker than had been expected.

The dark spot remains unemployment still stuck at 8.5 per cent.

'The Icelandic people have shown great determination and resilience in implementing complex policies under difficult circumstances,' IMF Deputy Managing Director Nemat Shafik said.

But an association of householders in Reykjavik takes a radically different view, noting that 95 per cent of all debt relief went to companies instead of households.

That policy placed an unfair burden on families, while letting the bankers off, the association argues.

Many families were lured into running up huge debts during the earlier economic boom, with banks freely financing purchases of homes, vehicles and other expensive imported goods with credits in euros, yens, dollars or pounds.

The cost of paying them off has exploded, given the fall in the value of the krona.

Many on the island know full well they will never be able to pay off their debts. This has generated even more bitterness than the obvious deterioration of infrastructure and public services, such as childcare and policing.

As Grimsson was fleeing the eggs and catcalls this weekend, his wife, Dorrit Mousaieff, staged her own impromptu demonstration. She scaled police barriers and joined the protesters, embracing some of them in a show of support.

The gesture by the Israeli-born businesswoman, who has amassed her own fortune, was not universally welcomed. 'I think you're doing this purely for show,' a female demostrator remarked acidly to the first lady.