Iceland: Skating on Thin Ice
Published by the Press Association, 24 Oct 2008
For a country believing in elves and living on a smidgen of volcanic rock near the North Pole, Iceland has managed more in the past 50 years – both good and bad – than most other nations could ever dream of doing.
Post Second World War large-scale energy investments and foreign capital turned this once-poor fishing-dependent economy into one of the richest in the OECD, creating a standard of living where unemployment is exceptionally low and geothermal energy powers homes and businesses. More books are published and read per capita here than anywhere else in the world.
But due to some dodgy banking in the past few years – banks were privatised and expanded to increase overseas lending to more than 10 times the size of the nation’s economy - Iceland has now joined the ranks of Osama Bin Laden on British anti-terror lists.
With its assets frozen, six billion dollar loans requested from the IMF and talks between Britain and Iceland stalling, Reykjavik doesn’t seem to be doing so well.
Once the hip destination of choice for discerning Londoners, New Yorkers and Berliners, Reykjavik holds 60% of Iceland’s 300,000-strong population – most of whom seem to be out in the street when I visit.
Last weekend [Oct 18/19] one of the nation’s major exports – its creative industries – was celebrating its five-day annual fete dedicated to up and coming music. At Iceland Airwaves, international superstars Vampire Weekend and CSS play alongside Icelandic bands such as FM Belfast and Mammut.
Well-dressed Icelandic teenyboppers were darting in and out of bars as their parents stalled their bumper-to-bumper Alfa Romeos, Audis and shiny 4x4s (the staple of any Icelandic family – the country’s roads are notoriously bad) down Laugavegur, Reykjavik’s Rodeo Drive, where stores sell diamond-encrusted Rolex watches and garish paisley-printed tuxedos hang in shop windows.
“I thought I’d be seeing upturned, burnt-out cars and people eating rats when I came back,” says 23-year-old Matt Christianson, who swopped Reykjavik for London in August but returned for the October music festival.
“But everything’s exactly the way it was – it doesn’t look as if anyone’s even noticed that there’s a world recession going on.”
Jean-Francois Lochet, a French-Canadian waiter at the upmarket fish restaurant Vid Tjornina, which regularly holds private dinner parties for Icelandic bankers, agrees.
“I would say we’re even more popular now than before the crisis hit,” he explains in between serving up dinners of grilled plaice and cod chins, a Reykjavik specialty.
“People panic in an economic crisis and think they have nothing to lose, so they end up spending more. I just wish I’d thought to tap those bankers’ tables, because then I would have known about this crisis before it hit and not lost the few savings I had.”
Although the national currency, the krona, is worth half its value since January (making it a great time for foreigners to visit), musicians like Ottarr Proppe, singer for the thrash-heavy band Dr Spock which represented Iceland at this year’s Eurovision contest, seem unworried about the crisis unfolding around them.
“I’m a musician, so I don’t have any money anyway,” he explains succinctly before handing me a free CD.
While Icelandic partiers out at Kaffibarrin, a bar co-owned by Blur frontman Damon Albarn, told me they’d had to pay for their night out on their credit card, the feeling on the street was business as usual, with many of the revellers knocking back £16 glasses of wine.
Having expanded exponentially in the past few years, Iceland’s banks made way for an upper echelon of society that the nation had never before seen, creating the divisions of wealth that we are now seeing collapse, says Hallantor Erikkson, a 48-year-old gardener.
“People had so much money, they actually had servants – cooks and cleaners and gardeners – who would do their dirty work for them,” explains the recently-unemployed Reykjavik native, washing away his pain in one of the city’s many thermal baths.
“I know I’ll find another job doing something else, but young people – and the immigrants who came here to send money home – are going to start leaving, because our money is worthless now.”
Prophecies like these might make for good headlines, but it might actually be too early to measure the full impact of the crisis, argues Andri Snaer Magnason, author of Icelandic bestseller Dreamland: A Self-Help Guide for A Frightened Nation, which portended an economic downturn at its publication in 2006.
“Everybody should have known that the gigantic hydroelectric dam we started building in 2002 – and which had an instant effect on boosting the krona – would have a downturn on the economy once it was completed,” the award-winning poet and playwright explains.
“We were creating a very masculine, greedy economy with the taste of gangsta rappers in terms of cars and luxury, having seen a major brain drain of the economists, engineers and philosophers of our major institutions over to the banks, because they were paid more money there.
“So we had no one stopping the crisis before it hit – and while it might be an expensive lesson, at least now we can be relieved we don’t have to send our kids to a certain school to please our neighbours.”
But Eggert Johansson, owner of elite fur shop Eggert, which sells coats made of seal, lynx and snakeskin (retailing for up to £40,000), is vocal in his outrage about the crisis, having hung a “Brown Darling, Your Credit is Not Good Here” sign in the window.
“I was in London when Brown made the announcement about the anti-terror laws,” explains Eggert, who learned his tailoring trade on Bond Street and counts Jeremy Clarkson among his friends and clients.
“And what he’s done is just disgusting: the krona has already fallen so much I thought I should put my prices up, but then I feared I’d lose my Icelandic clients.”
While the rich might renege on their Range Rover loans, others are certain that Iceland will bounce back from this crisis – and with other industries better intact.
“If there’s one thing that’s not damaged in reputation by this crisis, it’s Icelandic music,” says Anna Hildibrandsdottir of Iceland Music Export, which supports acts like Bjork and Sigur Ros.
“There are a lot of creative people and a lot of musicians in Iceland who will be good investments to help get us out of this crisis – and I am certain we will feel a lot better after this bout of spring cleaning.”