Former Icelandic Leader Tried On Economic Collapse
Originally published on Tue April 24, 2012 6:54 am
RENEE MONTAGNE, HOST:
And let's turn now to the first political leader to be put on trial for his role in the global banking crisis. Yesterday, a special court in Iceland found that country's former prime minister guilty of essentially mishandling the banking bubble that led to Iceland's financial collapse.
Michael Stothard has been covering this trial for The Financial Times. He joined us to talk more about it. Good morning.
MICHAEL STOTHARD: Good morning.
MONTAGNE: Could you begin by giving us just a little bit of context about what Iceland's situation was - the backdrop for this trial?
STOTHARD: Yeah. So Iceland saw one of the most extraordinary bubble and collapses in the 2000. The value of its banks ballooned to about 10 times the size of its economy. When Lehman Brothers went down these banks imploded and caused a huge recession in the country. And the Icelandic people understandably were very angry and the country has pursued cases against the prime minister and a lot of the bankers as well.
MONTAGNE: So this former prime minister, Geir Haarde, was convicted exactly of what?
STOTHARD: He was convicted of failing to keep his cabinet properly informed of the storm brewing in Iceland's financial sector and the economy. He was cleared of three probably more serious charges, which included not reducing the fines at the banking system to begin with and failing to heed various warnings.
MONTAGNE: But how does it happen that a politician would face criminal charges for essentially doing a bad job?
STOTHARD: Well, a lot of people in Iceland are asking the same question. Well, a lot of people also say that even in a context of a global financial system that it was getting out of hand, these banks were excessively unregulated and were doomed to fail and the politicians let this happen.
MONTAGNE: Right. But still in all, I mean there's not fraud here.
STOTHARD: No, no. No, no.
MONTAGNE: You would have to almost say these are the sorts of things that might bring criminal charges to most leaders of most Western countries during that time.
STOTHARD: Indeed, which is why it's a fascinating case, that this even went ahead to begin with. And it was in a way it's not surprising that a lot of the more substantive charges he was found not guilty of.
MONTAGNE: So I gather there is no punishment that has been handed down by the court and his legal fees are being paid by the government. So can he declare victory in this situation?
STOTHARD: Yeah. He said that this was effectively a victory for him and the one guilty verdict was just people trying to save face. I mean, a huge amount of effort has gone into this trial and they have to invent some charge, this what he said.
MONTAGNE: How is Iceland doing now?
STOTHARD: In many ways it's doing extremely well. It has seen faster growth than most of Europe. Its debt has been upgraded from junk status. It has finished its IMF restructuring program, and the economy feels like it's emerging from the fire, led by the fishing industry and tourism, which are its two traditional industries, and are blooming.
MONTAGNE: And banking - not so much?
STOTHARD: Banking barely exists. They have three very boring domestic lenders who are trying to get the system sort of back on track, just so it can function normally, then the kind of adventurous banking which it participated in heavily in the early 2000s is gone and likely never to return.
MONTAGNE: Thank you very much for joining us.
STOTHARD: Thank you.
MONTAGNE: Michael Stothard is the Nordic correspondent for The Financial Times newspaper. He spoke to us from Stockholm. Transcript provided by NPR, Copyright NPR.