RS 3: A New Mom And The President of Iceland

The most recent financial crisis in  the small frozen island in the middle of the ocean has been a long standing battle over savings accounts located in a bank that went bankrupt in 2008. NPR Planet Money talks about the recent update on Iceland’s financial troubles.

Before financial crisis, Iceland had become known as a major international banking center. Between 2008 and 2011, when their crisis occurred, people in the United Kingdom and the Netehrlands put their money into Icelandic bank accounts because of good interest rates. The bank suddenly failed and people oversees who had investments could not get their money out of the bank and returned to them. The problem with this was that people from Iceland did have access to do so, stirring trouble with out of nation-ers. A bill was created that promised Iceland would pay back the UK investors, however according to international law the country held no responsibility to actually do so. In 2011, the Prime Minister of Iceland vetoed the bill that meant that it would have to go to a public vote to pass.

David from NPR and his Icelandish NPR intern replay a podcast from Planet Money from 2011 when it was time for the vote to take place.

His issue is a case of secondary effects, in my opinion. As the Icelandic intern said and I agree, not paying back the foreigners could be seen as a case of discrimination, could cause hate towards Iceland, and could eventually could hurt their economy if nobody wants to invest in Iceland or hold deals with them anymore. In this case, the ends do justify the means, and what would the public decides the means were? This was a serious case to be voting on. The people of Iceland had tons of questions…

If Iceland paid back depositors of their own country, so is it discrimination under the law not to bail out foreign depositors?

Is it fair that someone bought shares and was wiped out because of a mistake?

Is it fair that we pay for the bankers’ mistakes?

Will I be paying more taxes to fix this situation?

Everywhere you went people were discussing interest rates. Heida, an Icelandic woman, said that the people of Iceland were well educated and did feel obliged to know what they are voting on, but it was still very strange that they were voting on something like this. It’s a strange situation when a new mom like Heida and the President of Iceland have equal say on the fate of their country’s economy could be.

Now, in 2012, the case officially came to a close. Iceland does not have to pay back their foreign investors and it hasn’t caused any financial upset for the country…so far. The countries still get along fairly well according to the British lawyer for Iceland of the court case (ironic) and Iceland’s economy is slowly turning around.

But, luckily for British and Dutch governments, they are still receiving money from a different investment in Iceland they had made, and that money is worth more than it used to be thanks to Iceland’s re-growing economy.