Update: Former Prime Minister Geir Haarde was convicted of one criminal count against him by the Landsdomur on Monday. He was convicted of failing to take steps to assess the risks to the state after the private banking system collapsed. Haarde dismissed the conviction as a formality and said he might appeal to the European Court of Human Rights. A special parliamentary committee release a report in September alleging Haarde and former central bank head David Oddsson knew that private banks were accumulating overseas debt but that they were grossly negligent in failing to mitigate the effects.
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| credit: AFP |
{06.03.12} Geir Haarde
[photo] is facing charges of negligence related to the 2008 Panic in court. Iceland's three major banks collapsed in 2008 due to excessive foreign lending while Haarde was leader of the ruling Independence Party. A legal motion to dismiss all charges against him was denied last year and Parliament declined last week to grant a request from the current Independence Party leader to dismiss the charges. Haarde plead not guilty in June, and has steadfastly maintained the charges are politically motivated. Parliament referred the charges to a special court for trying cabinet ministers after a special investigation committee released a
truth report in which it said that seven officials acted with "gross negligence" in their management of the country's financial system prior to the bank failures. The report concludes that Haarde and the central bank head knew the banks were accumulating foreign debt at a rapid pace but were failing to hedge the risks. In April 2008 there were at least five meetings between Haarde and the central bank directors. Before the crisis Iceland's banks had foreign assets worth more than nine times the nation's GDP with equivalent debts. This situation was coupled to a monetary policy that kept interest rates high causing an inflow of foreign currency that overwhelmed the central bank's foreign currency reserves. When the liquidity crisis hit in 2007, Iceland banks were left holding a bag of worthless loans and collateralized securities. Some of the loans were made to former bank heads. In 2008 Kaupthing, Landsbanki and Glitnir were taken over by the government. They were holding debt equal to more than 900% of Iceland's GDP. They were truly too big to rescue. Iceland was forced to accept loans from the IMF to recover from the crisis. Massive public protests against the imposed austerity measures
{Iceland} forced Haarde and his rightwing coalition government from office. Iceland now has its first leftwing government.
