Iceland President Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North.  But if we had accepted, we would have become the Haiti of the North.

Britain of the North

Iceland  is a European oddity. An island-state with population of 320 000 concentrated in few urban centres,  it is mostly mononational, speaking the Icelandic language, which didn’t change much from the 9th century.  If everybody doesn’t quite know everybody, he knows his uncle’s wife. There is a strong sense of tradition and community.

Iceland's last century economic history is a short introduction into  the rise and fall of the European industrial and postindustrial society. In the beginning of XX century Iceland, then a monarchy, had relied on agriculture and fishing and was one of the poorest in Europe. In 1944 Iceland became a republic and industrialisation,  for example cheap hydrothermal electricity made Iceland one of the major world smelters of aluminium, had helped it to become one of the wealthiest nations in the world by 1990. The welfare state had provided free healthcare and  tertiary education.

In 2003 Iceland had decided to jump on the moving fast bandwagon of the new liberals and had privatised its banks. After this British and Netherland press printed pages of advertisements  of the Icesave, an Iceland’s internet-bank promising fabulous 5% return on the savings. Not only individuals, but  British city councils had kept money in the Icesave accounts. In 2007 Iceland's three main banks made loans equivalent to about nine times the size of  the country’s GDP.

Cyprus of the North

However, the noughties bankwagon [sic] had been аllready speeding underhill, to the imminent crush.  In 2008  the world  economical  crisis had  led to difficulties in refinancing  of  the short-term debt and a run on deposits in the Netherlands and the UK of all three of the Iceland’s major private commercial banks.  The country’s currency, kronur, had collapsed and the banks had been re-nationalised.

What followed did not exactly fit the usual “get money from IMF and richer countries - cut welfare and jobs - get into the endless recession - borrow more money” circle. According to the Icelandic law only deposits inside the country, but not in foreign branches were guaranteed by the Government. The UK and Netherlands had applied pressure to get the money from Iceland -  £2.35bn (€2.7bn) repaid to UK and €1.3bn repaid to the Netherlands, offering a loan. The Icesave bill 1 was the initial attempt for a loan agreement,  it was passed by the Icelandic Parliament (Althingi)  and  been enacted by the president. But the Bill 1 was not accepted by the governments of UK and Netherlands, because the bill limited Iceland's repayment guarantee only to 2024. In the hindsight it is easy to say that they shouldn’t have been so greedy, but they didn’t expect to deal with  Hördur Torfason and the Icelanders.The protests, which became known as the Kitchenware revolution, resulted in the Icelandic Government resignation and general elections.

Cuba of the North?

The governments -  would be creditors came up with Icesave bill 2, where no time limit was included for the Icelandic state's repayment guarantee, it was accepted by the Icelandic parliament. But the new Icelandic president,  elected as a result of the mass protests, Ólafur Grímsson refused to enact the law, and referred  the decision  on the bill to a referendum  6 March 2010, where it was subsequently rejected by the voters. So was the later Icesave bill 3.

After this the Icelandic government had decided to go for arbitration to the Court of Justice of the European Free Trade Association States (EFTA Court), responsible for the three EFTA members, which are also members of the European Economic Area: Iceland, Liechtenstein and Norway.  On 28 January 2013, the EFTA Court cleared Iceland of all charges.

Crowdsourced Constitution

The other result of the Kitchenware revolution has been a process to change the Constitution.

1.500 people from 18 to 80 years old were invited to participate in the Constitutional Assembly.  1.200  people  were chosen randomly from the national registry, while 300 were representatives of companies, institutions and other groups. The work of the Assembly has resulted in the election of 25 people of no political  affiliation, who after considering 3600 written comments sent by the public, produced a draft Constitution.

The new Constitution proposal  starts: „We, who inhabit Iceland, want to create a fair society, where everyone is equal. Our different origins enriches all of us as a whole and together we have the responsibility for the legacy of the generations, land and history, nature, language and culture.“

The main points of the draft are:

* rights of media are put in the constitution and freedom of information is increased

* resources not under private ownership are owned collectively and eternally by the people of Iceland.

* 10% of the electorate can demand a national referendum on laws passed by the Parliament and 2% of the electorate can produce a legislative proposal to Althingi.

*Emphasis is put on increased autonomy of local authorities.

As  this article goes to press, the new Constitution is in the process of the Althingi discussion and subsequent referendum.

While it looks that the British Government did not draw any conclusions from the near-collapse of the banking system and is ready to re-privatise nationalised British banks at a loss for the taxpayer. The bankers are getting their bonuses  again while the Government is scared of Atlas Shrugged-style  bankers’ exodus, preferring to repeat boom and bust circle. But Iceland shows that there is another way - way of true, direct democracy and putting the interest of the community above interests of  a  few greedy individuals and corporations. Viva la Iceland!