Monday, March 12, 2012

Holding the Government to Account

Iceland is witnessing a trial that is unprecedented. A special criminal court has been convened for the first time in the country's history. Its purpose is to try the former Icelandic prime minister Geir Haarde (left) over the sensational economic collapse in October 2008 – simply known here as The Crash – which catastrophically bankrupted the small island nation.

Haarde, 60, is to date the only politician anywhere in the world to face criminal charges over the financial crisis. The charges, which he denies, include "serious neglect of his duties… in the face of major perils looming over Icelandic financial institutions and the state treasury, a danger he knew of, or should have known of". If convicted he could face up to two years in prison.

Once the poorest country in Europe, which before 1990 did not have its own stock market, Iceland in the years after the millennium set out to reinvent itself as a global financial hub, embarking on what has been described as "one of the purest experiments in financial deregulation ever conducted".

Successive politicians privatised Iceland's natural resources and dismantled its regulatory mechanisms, sparking an economic bonanza for its bankers and mixing for its citizens the now-familiar toxic cocktail of bountiful credit, flaccid financial oversight and an unspoken collective agreement not to ask too many questions but just keep on spending. In 2007 Iceland topped the UN Human Development Index as the most developed country in the world.

Its three main banks, controlled by a tiny elite cabal, had a paper value of more than 10 times the country's GDP.

"I had the belief that Iceland could become an international financial centre," Haarde, who became prime minister in 2006, told the court. "None of us realized at the time that there was something fishy within the banking system."

The collapse of the three banks, requiring the country to take an emergency IMF loan, was "the most terrible shock", says Silla Sigursgeirsdottir, assistant professor of public governance at the University of Iceland.

I am following this trial closely. If Najib continues to be reckless with the country’s finances, Malaysians too can, one day, put him in the dock for mismanaging our economy! Now that is something to look forward to!

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