Iceland: 93% say ‘No’ to bail-out for investors

The IMF is the problem: They are trying to dictate the policy of the country

We have seen recently some angry protests and demonstrations on the streets of Reykjavik. What is this “Parliament of the street”?

People in Iceland are very angry about having to bail out it’s financial elite by paying for their debts abroad. There is strong indignation among them also about how the country is being bullied by the institutions of global capitalism. Support for EU membership has declined greatly among Icelanders because of how the “Icesave” dispute is being handled by the ruling powers of the European Union. A climate of anger and distrust among Icelanders towards institutions such as the EU or the IMF has developed. Another significant issue for many working class and middle layer households is the monstrous rise of their personal mortgage debts since the collapse of the bank system and decline of the national currency. A large part of Icelanders face serious problems now with paying their mortgages and making ends meet. In Iceland the debts automatically rise with inflation, and the consequence of that is that many households are facing bankruptcy, or are unable to make ends meet after paying of their loans.

Large sections of the population are therefore quite desperate and feel helpless. The government has done next to nothing in helping those people. They haven’t taken any steps to solve those problems facing ordinary people, while spending billions of Icelandic kronur in bailing out the bankers. So there is a very strong demand now in Icelandic society for some action to be taken, such as debt cancellation.

There have been demonstration meetings since December last year, where people have been calling for the cancellation of mortgage debts and protesting against having to pay the debts of bankers. These demonstrations have been taking place more regularly and with more people participating since January. A new protest movement seems to be developing and escalating. The so-called “Parliament of the Street” is a newly formed umbrella organisation of different activist- and grass-root organisations who have united in organising weekly demonstration meetings in the centre of Reykjavik. The organisations involved include the Icelandic section of Attac, the organisation for the defence of households, The Red Platform, the Icelandic Humanist Association and a group which fights for the interests of disabled people.

The demands they put forward are: for at least partial cancellation of debts on mortgages and households, abolition of the debt index, abolition of debts when people go bankrupt, the IMF out of the country, the “risk investors” who bankrupted the country to be held responsible for their actions, human values be be put before profits and more opportunities for the general public to have a say in how society is run. The first demonstration this alliance organised was last Saturday, the same day the referendum was. More than 600 people were there to protest the “Icesave” deal. You could feel a lot of anger and indignation from the people present against the bullying that is now taking place against Iceland.

What was the ‘Icesave referendum’ in Iceland – on Sunday, 7 March 2010 – all about?

We were voting on the law passed by the Icelandic parliament which would make taxpayers guarantee the repayment of the massive debts, caused by Icelandic bankers, to the British and Dutch states. Icesave was the name of the online banks set up in Britain by Landsbanki, one of the big 3 banks of Iceland. When the Icelandic banks collapsed in October 2008, the government passed emergency legislation to rescue their deposits. But those outside Iceland were not included. So the British and Dutch governments jumped in and paid €3.8bn to bail-out the depositors in their countries. Afterwards, they tried to claim it back from Iceland.

The majority in the Parliament led by Social-democracy and the Left-Green Party accepted that and passed the ‘Icesave law’. The opposition, right-wing parties, don’t oppose paying in general, but only argued that a better deal with the governments in Britain and the Netherlands would be possible.

But the president, Olafur Ragnar Grimsson, didn’t sign this into law. Even though his position is largely symbolic, with little power, he has to sign all legislation which passes through parliament. According to the constitution, he can refuse to sign legislation and if that is done, it triggers a referendum. This is the first time it has ever happened, however. The Icesave law is very unpopular and controversial. So, Grimsson refused to sign it, presenting himself as a real representative of ‘democracy’, even though, because of his previous policies, he was more seen and known as a representative of the bankers.

What was the result of the referendum?

Ninety three per cent said ‘No’ to this bill and the turnout was 62 per cent, much higher than expected. This marks a clear defeat for government policy. The people who voted ‘No’ did so for a mixture of reasons. Some people completely oppose the idea of paying this money at all. Others hoped for a better deal with the British and Dutch governments.

The prime minister and the minister of finance said that the result didn’t surprise them because they knew that the issue was unpopular. But they also claim that the referendum was meaningless because new negotiations with the British and Dutch governments had already started before the referendum took place! They aim to present a new deal with the British and Dutch governments soon.

The 5 October 2008 turned Iceland from one of the richest countries to a bankrupt state. What did the government do?

It put forward this emergency legislation and brought in the IMF. The IMF demands that the Icelandic state should ‘honour its obligations abroad’, including paying the so-called ‘debt’ to British and Dutch governments. But this debt was caused by the Icelandic financial elite and working-class and middle-class Icelanders should not have to pay it. The IMF demanded that the federal bank lowered interest rates, and wanted it to abolish restrictions on currency trading, and other technical economic measures. The federal bank is now running low on its currency funds.

If Iceland pays the money to the British and Dutch states – as the IMF demands – it would be an equivalent of €48,000 per head of the population in Iceland. To be able to pay this money, the government has started to attack living standards, with cutbacks in healthcare and education.

Moody’s rating agency has threatened to lower Iceland’s rating to that of junk bonds. What would be the result?

Many people fear that. A lot of people fear that Iceland could be reduced to a pariah status internationally if we refuse to pay the full amount. On the other hand, people are also afraid of the consequences for the economy and living standards if we pay the debt. I think it is too soon to say what will happen exactly. But I think paying the so-called debt will have more serious consequences for workers and youth in Iceland than if we refused to be bullied by the institutions of global capitalism. I don’t have any illusions in the government or the new negotiations. The best thing would be to mobilise people now for a generalised mass movement against paying these debts and against the power of the financial institutions like Moody’s.

The trade unions are very passive. The official left parties, like the Social-democracy and the Left-Green Party, are not working-class parties. So we have to attempt to win back the unions as tools of struggle in the interests of the workers and build a new workers’ party. This will take time and effort, but it’s the only plausible alternative.

The governments of Sweden and Finland have hinted that they could stop their financial help for Iceland because of a No majority in the referendum. What results will this have?

The Swedish and Finnish governments are loaning Iceland money through the IMF. Unfortunately, these sorts of threats can be effective in restraining the people from fighting for their own interests. The IMF is not acting to help Iceland maintain its healthcare or defend living standards. The loans from the IMF are only to increase the currency funds of the federal bank and get the currency floating again. As far as I can see, the IMF is the main problem: it is trying to dictate the policy of the country.

After protests in the street, the old government had to resign in January 2009. After new elections in April 2009, a government of the Social-democracy and the Left-Green Party was formed. Did anything change?

Not really. There were big hopes and illusions in the beginning. The new government continued the attacks on living standards and public services, but presents them in a milder form. For example, in the health care system, they ‘only’ intend to take smaller steps than the previous government in implementing the cuts, postponing them a bit but implementing them nonetheless. The governmental policy hasn’t changed much. The ‘Left-Green’ minister of finance, Steingrimur Sigfusson, has now re- privatised the banks, which means he is responsible for the biggest privatisation in Icelandic history!

When people went onto the streets last year, they demanded the resignation of the government and new elections. They also demanded that the board of the federal bank should resign. Now a lot of people are disappointed because nothing has really changed after those goals were achieved. The problem was that this movement was very spontaneous. It had no long-term goals. The unions were very passive – in fact, they were absent. So the movement brought down the government, but no social change has followed. We should be asking ourselves in Iceland and anywhere else, what changes do we want to see? The discussion should not be about whether we support the government or not, because the government does not support the workers and youth.

And, what changes do you want to see?

I’m in favour of an automatic rise of wages to keep pace with inflation. A cancellation of the debts of working people’s households should be implemented. Iceland should stop paying all foreign debts and defend their health care and education. The books of the financial institutions should be opened. We want to see where the money went to. The nationalisation of the fishing industry and aluminium industry is necessary, under workers’ control and management, to use the wealth of the country in the interests of workers and youth. The banks should be re-nationalised under workers’ control.

How can this be achieved?

The only alternative is to put pressure on the government and fight the government by street demonstrations, strikes, and other forms of protest. We should stop the cut backs and struggle to get the IMF out of the country.

The most important thing is that, if Iceland refuses to pay for that Icesave money, it can act as a model for resistance in other countries in the neo-colonial world, or other countries in Europe, like Greece, which face similar problems and bullying. We need a global perspective of linking the struggle to that of other countries.

The working class and the youth should not have to pay for the crisis of the capitalist system. If we struggle together, European-wide and internationally, we can defend our standards of living against the onslaught of the capitalists.