Business, City Focus, Featured Work, Iceland, Spectator Business - Sat November 14, 2009

City Life Worlds fair and unfair: from Iceland and Ujamaa to Expo and East Timor

Elliot Wilson in Reykjavik

Mike, a commodities trader from Chicago, leans over the table in Reykjavik’s Prikid bar and almost whispers: ‘What’s the deal here? Where are the breadlines?’ Our group looks befuddled. An Icelandic playwright mock-whispers back: ‘What breadlines? Did you expect Reykjavik to be full of bakeries?’ No, retorts Mike, but didn’t Iceland declare bankruptcy a year ago? So why isn’t everyone sleeping on the streets?

It’s not an unreasonable question. Iceland’s 300,000 citizens have just struggled through their worst annus horribilis since Ingólfur Arnarson built his homestead in Reykjavik in ad 874. Inflation is running just shy of 10 per cent, while the Icelandic króna has lost more than half its value in the past year. The three major banks — Landsbanki, Glitnir and Kaupthing — collapsed after years of mismanagement and over-expansion, forcing the 1,080-year-old parliament, the Althing, to beg the IMF for a bailout. British and Dutch investors lost more than £3 billion when Landsbanki was shuttered: the Althing is still locked in furious discussions about how — and whether — to repay its debts.

Such financial incompetence has infuriated this normally stoic nation. Yet the truth is that everyone is to blame, from brainless bankers to cack-handed regulators to citizens living beyond their means. Hildur, a local journalist, took out a 4 million króna (£20,000) loan with Landsbanki in 2007 to send her teenaged son to a summer basketball camp in Boston. Landsbanki convinced her to peg the loan to the Swiss franc: in just 12 months, Hildur’s loan has risen to more than £40,000. ‘I’ll still be paying this back in 20 years’ time,’ she wails.

Even the government is furious. In January 2009, a cronyist centre-right coalition was turfed out and replaced with a cronyist left-wing one. Ministers raced to slash spending, often in the face of anger from opposition MPs culpable for the crisis. Indridi Thorlaksson, chief adviser to the finance minister, is scathing about predecessors who blame anyone but themselves. ‘I have bitter feelings toward the bankers and the others that led us into this,’ he says.

Yet there’s so much to like here. Tourists love the weak króna: English, American and Irish accents dominate the streets of Reykjavik on Friday and Saturday nights. And when the bars shut there’s always something to do. One night a group of us, including the cream of Iceland’s theatre community, head out in search of the Northern Lights. Alas the aurora borealis fails to show, but we return to the city reinvigorated. Reykjavik may be floating on a iceberg of debt, but this unspoiled dead-of-winter wilderness is a marvellous place to lie in the snow and sip brandy.

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