Sunday Times Book Review of Meltdown Iceland by Roger Boyes
He calculates that the so-called Icelandic “financial elite” consisted of no more than 30 people. The new banks funded the politicians who had privatised them and global expansion came to follow a familiar pattern: “1) Icelandic bank with dubious credentials bids for established foreign bank using borrowed money; 2) targeted bank eagerly takes the offered cash, claiming to be acting in the interest of shareholders, then registers doubts with FSA or other regulatory body; 3) FSA contacts Icelandic regulator, who offers reassurance; 4) Icelandic regulator attends school reunion with Icelandic banker.”
Gradually it became clear that prime minister Oddsson had created a monster that was devouring his own country. By the time he left office in 2004, the assets of the three big banks — Glitnir, Kaupthing and Landsbanki — were as large as the country’s gross domestic product; by 2006, they were eight times the size; by 2008, on the eve of the world’s financial collapse, 10 times.
It is hard to think of a European country more incompetently run in the past 20 years than Iceland. The credit crunch bankrupted the nation. Boyes reproduces in its entirety the chilling transcript of the telephone conversation between Britain’s chancellor, Alastair Darling, and his Icelandic counterpart, Arni Mathieson, as news broke that the Icelandic banks were intending to default on their obligations to their British customers. “We are in a very, very difficult situation,” wails Mathieson. “I can see that,” says Darling, before adding, in the quietly threatening manner of a mafia accountant who wants his boss’s money back: “You have to understand that the reputation of your country is going to be terrible.”