Just a few short years ago, Iceland had much to be proud of. The good times were rolling so fast that one expected the country’s almost round-the-clock summer daylight to last all year. Business was booming, society overfed, and the capital, Reykjavik, was in vogue as a travel destination for rich revellers, gastronomes and culture lovers.
Iceland is a country of dramatic natural beauty: lunar landscapes, spouting geysers, sheer glaciers and craggy volcanic rock formations; an impressive but inhospitable isle floating in mid-Atlantic isolation. When, in 2007, it topped the UN’s Human Development Index for its high standard of living, literacy and life expectancy, the tiny community of 310,000 felt they had proved their educated, hard-working and resilient character on an international scale.
The previous year, America had abandoned its long-standing naval air station at Keflavik. Symbolically, the move set Icelanders free from more than seven centuries of foreign domination, first as a Norwegian and then a Danish colony, and for the past 65 years, less formally, under the wing of the US.
“The Vikings” had risen again, and this is the admiring title the country bestowed upon the small group of aggressive businessmen whose high-risk investing bloated the island’s economy to 10 times its GDP, buying up chunks of the British and Continental European high streets in the process. French Connection, Debenhams, Karen Millen, Oasis, Warehouse, Mappin & Webb, Hamleys and many more fell into Icelandic ownership. So did West Ham United football club. When Icelanders visited Copenhagen, they would strut into its smartest department store to buy expensive fashions from “their” shop. Like many British chains, it too was owned by the “Viking” Jon Asgeir Johannesson’s Baugur group: one in the eye for the mother country.
Few stopped to consider, let alone fret over, whether their swift financial ascent would end in an equally steep plunge into oblivion. They were too busy flying to Barcelona for dinner, opening smart boutique hotels, investing in art, planning massive public buildings and buying Range Rovers and Audi Q7s – Iceland is one of the top car-owning countries in the world.
In October, Iceland’s three main banks were nationalised and declared bankrupt. Overnight, any Icelander – and there were many – who had bought these status vehicles or invested in luxury new properties with a foreign loan found the value of their purchases plummeting as repayments soared. The currency, the Krona, fell to one quarter its value before trading in it was suspended. Thousands of hard-working couples nearing retirement age had placed their life savings in stocks with the Landsbanki, Glitnir and Kaupthing banks which led the crash. For many, every penny disappeared into the turbulent waters which connect Iceland with its American and European neighbours.
Frugal Icelanders have been stung too. Food and petrol costs are rising all the time and with interest rates nearing 20 per cent, domestic mortgages, even modest ones, are becoming impossible to service.
“The feeling is we are unable to look after our own affairs” says Hallgrimur Helgason, one of the country’s leading novelists. “We were on our own for years and we went too far, too fast, in too little time. We behaved like children and the first thing we did when the stock market opened 10 years ago was go to London and buy toy stores and candy stores. Now we are bankrupt and there will be no money for years to come and we have more debts than we can ever repay.
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