The Icelanders have dared to say no to the banks that caused their economic crisis. Icelanders have overthrown a government that wanted to burden Icelanders with burdensome payments to pay off debts of failed banks. They also are creating a new constitution that is being framed through very democratic processes. Finally, they are attempting to bring some of the key banking figures inviolved in the crisis to court.
Last week 9 people were arrested in London and Reykjavik for their possible responsibility for Iceland's financial collapse in 2008, a deep crisis which developed into an unprecedented public reaction that is changing the country's direction.
Iceland is the world's oldest democracy --since 930 AD. Their revolutionary weapons have been massive demonstrations banging pots and pans.The revolutionary process has its origins in 2008 when the Icelandic government decided to nationalise the three largest banks, Landsbanki, Kaupthing and Glitnir, whose clients were mainly British, and North and South American. The nationalisation was simply to prevent complete collapse of the banks.
The official currency (krona) plummeted and the stock market suspended its activity after a 76% collapse. Iceland was becoming bankrupt and to save the situation, the International Monetary Fund (IMF) injected U.S. $ 2,100 million and the Nordic countries helped with another 2,500 million.
The Icelandic people were not in favor of the IMF conditions and took to the streets and their persistent daily demonstrations outside parliament in Reykjavik prompted the resignation of the conservative Prime Minister Geir H. Haarde and his entire government.
Protesters demanded, in addition, to convene early elections, and they succeeded. In April a coalition government was elected, formed by the Social Democratic Alliance and the Left Green Movement, headed by a new Prime Minister, Jóhanna Sigurðardóttir.
During 2009 the Icelandic economy GDP droppped by 7 per cent. Nevertheless the new government to please investors proposed to repay the debt to Britain and the Netherlands. Payments would be made by Icelandic families for 15 years at 5.5% interest.
This move sparked anger at the new left leaning government. Icelanders returned to the streets demanding that the decision be put to a referendum. In March 2010 that vote was held and an overwhelming 93% of the population refused to repay the debt, at least with those conditions.
This forced the creditors to rethink the deal and improve it, offering 3% interest and payment over 37 years. Not even that was enough. The current president, on seeing that Parliament approved the agreement by a very narrow margin, decided last month not to approve it. She called on the Icelandic people to vote in a referendum so that they would have the last word.
An assembly was elected to draft a new constitution that would reflect the lessons learned and replace the current one, inspired by the Danish constitution. Instead of calling experts and politicians, Iceland decided to appeal directly to the people, after all they have sovereign power over the law. More than 500 Icelanders presented themselves as candidates to participate in this exercise in direct democracy and write a new constitution. 25 of them, without party affiliations, including lawyers, students, journalists, farmers and trade union representatives were elected.
This constitution will call for the protection of freedom of information and expression in the so-called Icelandic Modern Media Initiative, in a bill that aims to make the country a safe haven for investigative journalism and freedom of information, where sources, journalists and Internet providers that host news reporting are protected.
The people, for once, will decide the future of the country while bankers and politicians witness the transformation of a nation from the sidelines. No doubt Iceland may have trouble borrowing money however. No doubt it will not be inundated with foreign investment either. But the economy may very well improve without a massive inflow of foreign capital and financial speculation by Icelandic institutions. The government can use Icelandic banks to finance development in Iceland. For more see this article.