Global troublemakers

The world needs less Iceland: from geology to finance, it’s at the centre of the storm

Lucas Jackson/ Reuters

Its population is smaller than metropolitan Victoria. It sits in a forbidding corner of the North Atlantic far off the beaten track. Even its name seems designed to keep visitors at bay. Yet for a tiny speck in the middle of nowhere, Iceland certainly has a knack for being at the centre of things.

The Eyjafjallajökull volcano is not the first to wreak havoc on the world. In 1783, the much more devastating Laki volcano—it erupted for four months—covered Europe and much of Asia with a dense cloud of gas. A quarter of Iceland’s population died and temperatures around the world fell the following year, causing severe famines from Japan to Egypt.

Fast-forward to the 21st century and Iceland again found itself making the world a little cooler. Thanks to a robust local music scene and the international fame of singer Björk (well-known for her own volcanic eruptions with the paparazzi), the capital city of Reykjavik became the place to be.
When the New York Times visited in 2004, it raved about this “ultra-hip?.?.?.?‘Wild On’ city where weekend throngs of natives and foreigners drink and dance the long winter nights away.” Hipster tourists kept the dance floors hopping until 5:30 a.m. Unfortunately, this party atmosphere seemed to permeate the financial sector as well.

Online banking quickly became the foundation for Iceland’s booming economy. Ice­save, the largest of these operations, proved extremely popular in Europe, where it vacuumed up deposits and lent with a wild abandon unmatched by anything on Wall Street.

Then, in 2008, came catastrophe. A massively leveraged economy meant the global financial collapse was felt first and most severely in Iceland. What was once one of the richest and most stable countries in the world was soon teetering on the edge of ruin. Relative to the size of its economy, Iceland’s banking failure was the largest in history, according to the International Monetary Fund.

Nor has this pain been confined to Iceland’s shores. Recently, Icelanders voted 93 per cent against a plan to repay the governments of Britain and the Netherlands for $5.7 billion in dishonoured online bank deposits. The deal, voters complained, was more onerous than the war reparations demanded of Germany after the First World War. Negotiations continue. And the domestic economic situation remains dire. McDonald’s restaurants pulled out last October, and this month Pizza Hut announced it was shutting down all but one of its outlets on the island.

Adding to this misery is Eyjafjallajökull. Iceland is again ground zero for the world’s problems.
With its geography and economy having set off cataclysms of global significance, another Icelandic endeavour may soon be drawing attention. Iceland has been dubbed “the world’s most feminist country”; it boasts the world’s best-paid maternity leaves, and has already had two female heads of state. Recently, it took time out from its financial crisis to outlaw the country’s entire sex industry—from strip clubs to prostitution. Maybe that’s a good idea. If it means a little more peace and quiet for Iceland, the whole world will be grateful.

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