Iceland was the first country to be hit by the financial crisis—and it was hit hard. When the global economic crisis hit in 2008, Iceland suffered terribly—perhaps more than any other country. The savings of 50,000 people were wiped out, plunging Icelanders into debt and placing 25 percent of its homeowners in mortgage default. Its three biggest banks—Glitnir, Kaupthing and Landsbanki—were 14 times larger than Iceland’s entire GDP and had lent excessively and recklessly. In the mid-1990s, under the leadership of David Oddsson, of the center-right Independence Party, who was prime minister from 1991 to 2004 and inspired by Reagan and Thatcher, Oddsson slashed taxes and privatised Iceland’s biggest banks, freeing the country's financial sector and entrepreneurs to embark on a decade of unprecedented growth and asset accumulation. As prime minister and, later, as head of the Icelandic Central Bank, Oddsson helped turn the country into a global financial player. For a few years, Icelandic banks worth billions of dollars managed cash for internationally recognized brands and a new generation of Icelandic conquerors bought up corporate assets around the world.
Much to the delight of some on the Left throughout the world, Iceland let the big banks topple and prosecuted the bankers. Several CEOs from the country’s largest financial institutions were sentenced to between four and five years in prison. These criminals didn’t get off with just fines but spending time in prison.
The radicals and progressives busy praising the Icelandic government overlook that the class war still exists and is currently ongoing. Nearly 1,000 people recently gathered in front of Government House in downtown Reykjavik in silent protest against their government. In a country with only 320,000 people, a crowd of 1,000 counts as a mass political event. Supermarkets in Iceland are running out of meat due to a nationwide strike called by vets as veterinarians are required to approve conditions at slaughterhouses and inspect imported meat.
Seven years after the financial crisis began, the government’s austerity course is seeing a backlash.
“There’s no trust anymore,” said protester Bragi Skúlason, 57, a Lutheran chaplain at Landspítali, the largest of Iceland’s two major hospitals. “It’s gone. And politicians have to realize that.”
The organizers behind the protest were two of Iceland’s major public sector labor organizations, representing university professors and nurses, both of which have been on strike for weeks. Officials have hinted to the local press that the government may pass legislation outlawing the strike and compelling the nurses to return to work. If they take that approach, many of the nurses are predicting mass resignations. Later this month, at least three other unions will join the strike as well. Iceland has already just narrowly averted a strike that would have affected 40% of its labor force, when the government reached a tentative agreement with four other major unions. The Icelandic government agreed to put a bill to parliament that would postpone ongoing strike action by specific member organizations of the BHM umbrella organization of academics, and the Icelandic nurses, until July 1.
Gudmundur Gunnarsson (father of the singer Björk) became head of Iceland’s electricians union in 1987, just a few years before Oddsson took office, and stepped down in 2011, when Iceland was just emerging from a post-collapse depression. In the early 1990s, Gunnarsson and other labor leaders reached an agreement with the government, the central bank, and various private sector businesses: lower wage increases in exchange for lower inflation. Workers were willing to accept modest raises, as long as they remained ahead of the cost of living. Between 1990 and 2000, Gunnarsson says electricians’ wages increased by only about 1.4 percent annually, but the real value of those wages was more than enough to stay ahead of rising prices. Then, Gunnarsson said, “Everything went crazy in Iceland." As the country’s economic boom hit its apex, foreign money deluged the Icelandic economy, while the country's citizens took advantage of the easy money to take on billions of dollars in household debt. Inflation started to rise, and the unions once again increased their wage demands in order to keep up. Union leaders from the other Nordic countries warned Gunnarsson that Iceland was headed for disaster. “I said, ‘It’s going well. Everybody’s happy. Everybody’s driving around in a new car and has a new house,'” said Gunnarsson. “And they said, ‘It can’t go on like that. There is something wrong.'" In 2008 — when the Iceland's biggest banks finally fell apart, the United Kingdom seized some of their foreign assets, and the krona plunged in value — Gunnarsson says electricians lost five years’ worth of wage gains. "We went down," he said. "Very fast, we went down."
In 2013, when the country's main labor federation tried to revert to the labor strategy of the 1990s, trading very gradual wage increases for low inflation and a stable currency. That frustrated many union members, who were still hurting from the meltdown and subsequent devaluation of their wages. When negotiators reached an agreement to raise pay for most workers by a mere 2.8 percent, several unions were incensed. Why should their members continue to sacrifice, they said, when bankers and business owners are only getting richer? Vilhjálmur Birgisson, chairperson of a fishermen’s union, told reporters at the time, “To my mind, it is shameful that the salaries of working people hasn't been corrected more than we've seen.”
In 2014 higher-skilled public sector industries went on strike. First, some teachers, and then the doctors union rejected the government’s offer of a roughly 3 percent pay increase and initiated a work slowdown in late 2014. Once wages for some of the skilled, middle-class public sector workers started to go up, other unions began to demand more. Soon unions in both the public and private sectors were readying for a general strike calling for a nearly 50 percent increase in the effective minimum wage. A poll from late April showed that more than 90 percent of Icelanders supported the union’s demand. While many of the workers on the lower end of the income spectrum have gotten an increase, educated, middle-class professionals — including electricians, nurses, professors, architects, psychologists, and others — are still on strike.
This month, the country began removing the capital controls it put in place following the financial collapse, a major step toward recovery. In a March address to the central bank, Finance Minister Bjarni Benediktsson hailed the country’s economic progress as “nothing short of a metamorphosis.” However, Orri Hauksson, the chief executive officer of Siminn hf, Iceland’s biggest telecommunications company, says the island only enjoys a “fictitious” stability thanks to those currency restrictions.
Gunnarsson is less sanguine about the future of his country. He says he is now considering joining some of his children and grandchildren abroad, perhaps in Denmark. “Everybody’s saying this isn’t working, and the government has to realize that,” said Gunnarsson. “We are not going to live in a country or a society like the right-wing politicians are building. We don’t like this.”
Páll Halldórsson, who leads the talks for the BHM association says a third of radiologists have quit their jobs and many vets and midwives have started looking for jobs in the other Nordic countries.