Report from Iceland

The aftermath of the “crash”

www.socialistworld.net, 15/05/2011
website of the committee for a workers' international, CWI

The desperate need for a clear lead to re-develop the movement

Paul Murphy, MEP, Socialist Party (CWI Ireland)

Arriving in Iceland, the second thing that arrests your eyes, after taking in the dramatic glaciers and cliffs that you fly over, is the prominent ads for Lanksbankinn, the bank whose collapse heralded the beginning of what is known as “the crash”. Its ads, together with the consequences of its speculative activities, tower over the people of Iceland.

I was in Iceland together with Tanja Niemeier (one of my co-workers in the European Parliament) for the “Study Days” of the European United Left group in the European Parliament, 2 to 5 May. There were a series of formal meetings organised around three topics – 1. The “Arctic dimension”, the race for the oil and gas resources under the Arctic. 2. A meeting about the crisis with the Left Green Movement Minister of Finance, and 3. A discussion dealing with the fishing rights, which are threatened in Iceland as a results of the discussions about accession to the European Union.

The meeting on the “Arctic dimension” was particularly interesting. Up to 25% of the world’s oil and gas reserves lie under the Arctic ice and a scramble is underway amongst the world’s major powers to get access to them. With that scramble comes a massive increase in militarisation in the Arctic region. The devastating logic of development on the basis of profit is exposed by the horrific irony that dependence on fossil fuels caused global warming and now, by resulting in the retreat of the arctic ice has unleashed a further race for fossil fuels that will cause yet more damage to the environment and impact on the lives of millions.

In addition to these official meetings, Tanja and I took the opportunity to discuss with activists in Iceland. We had a meeting with two of the three Left Green MPs (Lilja Mosesdottir and Atli Gíslason) who had broken with the government over its support for the “Icesave” deal. We also discussed with the Chairperson of the Red Platfrom, a left group active inside and outside the Left Green Movement.

What was a striking feature throughout all of the discussions are the repeated similarities with conditions in Ireland. We passed half built apartment and office blocks that stand testament to the sudden collapse of a bubble economy. As in Ireland, the private banking sector is hated as being the originators of the economic crisis. With a similarly high level of home ownership to Ireland, there is also a massive crisis for mortgage holders, particularly given that mortgages in Iceland are index linked (linked to inflation). The result is that with high levels of inflation, people’s mortgages have shot up while their wages have remained stagnant or reduced.

The most fundamental similarity of course is that in both countries a massive crisis has been created by the rule of the bankers and it is working people who are expected to pay the price. In Iceland, this has taken place through the collapse in the economy, the recession and the consequent unemployment, inflation and devastation of living standards. In the immediate aftermath of the collapse of the banking system, 40% of households could not pay their bills and pensioners lost their life savings, unemployment rose to 9%. With massive inflation, the purchasing power of the population fell dramatically and domestic demand fell by 21% in 2009.

A specific feature in Iceland has been the Icesave debt. This debt is a result of the crash of the Icesave online bank (the online brand of Landsbanki) which resulted in the loss of billions of euro by people and Councils in the Netherlands and Britain. The British and Dutch governments then compensated the savers and sought to make the Icelandic government and people pay this €3.9 billion. The Icelandic government (since 2009 a coalition of the Social Democrats and the Left Green Movement) agreed to a deal to pay this at an interest rate of 5.5%. Under pressure from a major movement, the President granted a referendum on this deal – a referendum that was overwhelmingly defeated by 93%. A second deal which still sought to make workers pay, but at an interest rate of 3% was also brought to a referendum and defeated by 58%. Now the case is set for the Court of the European Free Trade Area. The demand we raised with Icelandic activists is to refuse to pay the debt and that the bankers which benefited from the deregulation of banking and massive speculation must pay, not working class people.

The opposition of the Left Green Movement to these referenda is unfortunately confirmation of the argument that the Socialist Party and the Committee for a Workers’ International have made – that Left parties cannot enter governments committed to managing capitalism with so-called social democratic parties without betraying their principles. The result is that now the Left Green Movement is implementing an IMF austerity programme in co-ordination with the Social Democratic Party. Massive cutbacks have been implemented by this government, with 7% cuts to social welfare expenditure and 20% cuts to public spending across the board. The results have been devastating for public services, with healthcare badly diminished, with some hospitals being run down dramatically. The result, naturally, is a serious decline in support in opinion polls for the Left Green Movement.

When I challenged the Minister of Finance, Mr. Sigfusson, about this, his response was revealing. His defence of entering the government was that the Left Green Movement had no choice and that the traditional right in government would have been worse. However, despite his attempts to portray the government policies in a positive light, the evidence he himself gave illustrated the fact that this government is implementing an IMF austerity programme.

The implementation of these policies by the Left Green Movement has prepared the way for the potential return of the traditional right-wing parties to power and has also left open a major vacuum in society, which could potentially be filled by a right populist party, like the rise of the far-right True Finns party in Finland. The way to defeat cutbacks and attacks is to build mass movements like those that defeated the two referenda rather than participating in an austerity government.

The impression we were left with from our visit was the desperate need for a clear lead to be given to re-develop the movement that particularly developed against the first referendum and give it a Left character.

In breaking with the government over the Icesave deal, Left Green MPs Lilja Mosesdottir, Atli Gíslason and Asmundur Einar Daoason laid down an important marker on behalf of working people. We had a fruitful discussion with Lilja and Atli about how the movement can be rebuilt. In it, we emphasised how a clear lead from them could help to re-develop a major movement in Icelandic society and the need for this movement to be built on a clearly Left basis. In particular, they warmly welcomed the idea of common international action by working people across Europe against the attacks of the bosses. They are clearly considering and discussing what next steps to take.

Given the betrayal of the Left Green Movement, it seems that a new political force is needed in Iceland to represent working people. An initiative to launch a new party explicitly on the side of those who opposed the Icesave deal and committed to leading struggles as well as operating in the Parliament could potentially quickly develop into a mass workers’ party. Such a party should clearly reject working class people paying for the crisis and put forward a socialist programme based on the nationalisation under democratic public control of the key sectors of the economy and the natural resources.