Ire over banks fueled Iceland leader’s exit
Surging discontent in Iceland over Prime Minister Sigmundur Gunnlaugsson’s failure to disclose personal investments in the country’s banks drew fuel from lingering disgust over the banks’ behavior leading up to their collapse during 2008’s global financial crisis.
In a nation where bankers have gone to prison for their actions during the crisis, it should come as little surprise that Sunday’s explosive Panama Papers leak sparked an eruption of antipathy toward Gunnlaugsson, who stepped aside as prime minister Tuesday amid a furor over his investment. He had been prime minister since 2013.
Gunnlaugsson faced a vote of no-confidence in parliament after the Panama Papers, leaked law firm documents obtained by the International Consortium of Investigative Journalists (ICIJ), revealed that Gunnlaugsson and his wife held about $4 million in bonds in three Icelandic banks through a hidden British Virgin Islands shell company, Wintris.
Those banks collapsed in October 2008. Gunnlaugsson sold his 50% stake in Wintris to his wife in 2009 for $1. Wintris continues to hold substantial interest in those bonds after a deal that Gunnlaugsson’s government reached in 2015 with the bank’s creditors, which a watchdog group Gunnlaugsson led before becoming prime minister “criticized as too generous,” according to the ICIJ.
Monday, thousands of Icelanders protested outside parliament in Reykjavik, angry that the prime minister negotiated with banks when he had a personal financial interest that had not been known.
That Gunnlaugsson was an anti-bank crusader in his rise to political power fanned the flame.
He had pledged “to play hardball with foreign creditors, offer debt relief to struggling homeowners and end austerity programs,” according to the ICIJ.
The anger stems from the implosion in 2008 of three banks — institutions that had been transformed from stateowned institutions into privately controlled entities several years earlier, according to a report titled “Nordics In Global Crisis,” published by the Research Institute of the Finnish Economy. Close ties between the Icelandic banks and politicians lingered, according to the report.
It blamed inadequate regulation for allowing the Icelandic banks to engage in the equivalent of risky subprime lending, misleading customers about currency rates, taking out short-term loans to pay long-term debt and engaging in irresponsible international expansion.