Iceland's conspiracy complex

For reasons that will soon become clear, your humble blogger has been reading up on Iceland's financial boom and bust in recent years.  So I noted with interest that yesterday, Iceland's Prime Minister Jóhanna Sigurðardóttir took to the pages of the Financial Times to vent about her country's treatment at the hand of big countries... like the Netherlands.  See if you can spot the contradiction in her statements:

In its efforts to conclude negotiations over compensation for foreign savers in failed banks, Iceland has been accused of a tendency to imagine a British or Dutch conspiracy behind any bad news.

Iceland has no such tendency. It is battling the effects of severe banking and currency crises and a recession that is affecting our part of the world as much as any other. My government, which took over in February and gained a majority in general elections in May, has to deal with the aftermath of the fall of nearly all of Iceland’s privatised banking sector....

The FT has reported how the Dutch opposed the IMF lending to Iceland in order to enforce their demands on Icesave [an online bank headquartered in Iceland that attracted upwards of 300,000 British and Dutch depositors--DD], claiming the UK and Germany as allies. The perception is that Treasury officials in the UK and the Netherlands used their bargaining power against a much weaker party when the Icesave deal, now being debated in the Icelandic parliament, was struck.

This has made it difficult for Iceland’s government to convince the parliament and Icelanders that an agreement on Icesave accounts with the UK and the Netherlands is un-avoidable.

Here's the funny thing -- if you click on the link from the FT about how the Dutch are using the IMF to put the screws on Iceland, you get this story which sources those suspicions to.... Icelandic officials.  The story also goes on to say that, "The view in London is that Iceland has a tendency to imagine a British or Dutch conspiracy behind any bad news." 

To be fair to Sigurðardóttir, she wasn't in power when Iceland got itself into this mess.  Furthermore, Iceland did have help getting into this mess -- reading up, it's clear that EU banking regulations are even more screwed-up than US banking regulations.  And it wouldn't stun me if the Dutch were putting the screws on Iceland. 

Still, reading up on the mess in Reykjavik, it is truly stunning how little Icelanders seem to blame themselves for their current plight (and how much they thought their run of success was completely deserved).  The fault always seems to lie with cabals of hedge funds, rating agencies, foreign central bankers, etc. 

Iceland has had its share of bad luck, and until recently had a political class that was by far the most incompetent in the OECD area (and the competition in this arena is admittedly intense).  Still, reading Sigurðardóttir's op-ed, I can see why Henry Kissinger once described Iceland as the most arrogant small country he had ever encountered. 


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