Iceland today, July 10, 2009: an old Parliament burned down, the new one on fire with anger

Very little is left of Valhalla, the hotel-museum built on Thingvellir, the place where the first Icelanders were holding their yearly sessions of Parliament, after a blazing fire today.

At Thingvellir, Althing – the general assembly was established around 930 and continued to convene there until 1798. All major events in the history of Iceland have taken place at Þingvellir. Today Þingvellir is a national park…

The fire-department is still fighting the fire at the moment this post is written.
Many works of art, stored in the museum, could not be saved. The cause of the fire is still unknown. Miraculously, it is said, there were no victims.

This however,could not be said about a fire, that happened on the very same spot exactly to the date 39 years ago: on July 10, 1970.
On that day Bjarni Benediktsson, the coumtry´s  then ruling Prime Minister, died in a blazing fire in the official ministerial summer-house on Thingvellir, right next to the museum. The cause, it was said then, was a defect heater.
He was killed together with his wife and his young grandson.

While Bjarni Benediktsson was prime-minister, the phones of all opposition politicians and intellectuals opposed to Iceland´s NATO membership had been tapped,as the nation has been informed to it´s horror by recently released documents. This was done presumably on behalf of American Nato interests.
Another conflict that played out during Bjarni Benediktson´s time as prime minister, was the beginning of the next phase of the so-called “cod wars”.
On February 15, 1970, five months before his death, the Icelandic prime minister and his government decided to unilaterally expand the Icelandic territorial waters to 50 miles. This was done with the silent support of the American government, which later on also expanded it´s territorial waters. Great Britain, however, sent his Navy fleet into Icelandic waters to protect British fishing trawlers from the Icelandic coast-guard.
(Interestingly enough, today, on the morning of July 10, 2009, the British cruise-ship, Queen Victoria has landed on Icelandic shores for the very first time.)

Another Bjarni Benediktsson, the great-nephew of the former prime minister, born in the same year his great-uncle was killed, is now the leader of the largest opposition party, the former long-time ruling party.
His party is fully opposed to EU-membership. Today, the Icelandic Parliament was discussing a bill about a possible double referendum, for or against an EU membership, brought in by Bjarni´s Independence party.

Last week a bill concerning the Ice-save debts was discussed in a heated debate, with demonstrations of ordinary Icelanders going on outside the Parliament.

If the Icelandic Parliament does not pass the bill confirming the state’s overall responsibility for dealing with the Netherlands and the UK’s Icesave claims, – in other words having the Icelandic tax-payers paying the debts of the bankrupt private banks -  the coalition-government will fall. Part of the members of the ruling left-green party is opposed to the bill.  All the opposition parties are opposed as well.

Thorolfur Matthiasson, an economic expert has told the nation, that “Rejecting Icesave deal could be akin to declaring war”.
(All Icelandic economists have studied their trade abroad, in the US or Britain. If they make predictions, they normally have been well informed by their foreign contacts.

One of the reasons, why no other European country supports Iceland´s attempt to try a legal process is, we have been told, that if the EU banking regulation system is being challenged by even one country, all the system might collapse, since it would possibly result in a run on all European banks operating in other member-states.

Icelanders feel justified not to be made responsible for debts of the private banks, since the melt-down was caused by the lax European banking rules. The Icelandic government was goaded by their foreign advisers, especially from the British bank HSBC, one of the largest investment banks in the world, into privatizing the banks to allow for foreign investment money entering the country. The money, they promised, would then be used for large projects to further develop Icelandic hydro-energy resources. This would make Iceland´s economy less dependent on the value of it´s fishery exports and therefore less vulnerable to recessions and inflations.

Additionally the government was also told not to regulate the banks beyond European norms. In light of those norms, the Icelandic regulation agencies felt helpless to do anything to stop the irresponsible growth of the banks.

And while the Icelandic krona was strong, the banks were doing alright.
Then in January 2008, foreign hedge-fonts started to attack the Icelandic currency, causing over the next few months a near 50% loss.
It was this loss, that caused the banks’ demise.

Until the bankruptcy of Lehman brothers the Icelandic banks could borrow from other banks on the security of their considerable large assets.
With the Lehman bankruptcy, however, the inter-bank loan markets froze over totally. Old loans had to be repaid, new ones could not be gotten.

And when two of the three large Icelandic banks became insolvent and had to be renationalized and split up, the British government set Iceland on the list of terrorist supporting organizations, and froze Icelandic assets in the UK.
Subsequently, the last and largest Icelandic bank, which the government had tried to save with a bail-out, also fell and threatened a total economic melt-down of the country, as well as a take-over of all Icelandic assets by foreign creditors.

The majority of Icelanders want to bring the case to trial arguing that since the British government, as well as the lax EU banking regulations, have caused so much damage to the Icelandic economy, it would be enormously unjust to make the country as a whole responsible for the debts of the private banks. However, every attempt to get at least a preliminary court-ruling before European courts has failed. No European court wants to even hear the case.

Even Norway, which is, like Iceland, not a full member of the European Union, refuses to support the country.

So, if Iceland refuses the negotiated deal, the country will be once again put on a trade embargo from Europe and the rest of the western world.
Some Icelanders argue, that Europe and America aren´t the world. Iceland could seek ties with Russia or China.
In light of the fight over the Arctic sea between Nato and Russia, it isn´t unlikely that Russia would like a closer relationship with Iceland. And, if the Icelandic currency could no longer be used for trade abroad, Russia might agree to barter deals, goods against goods.

However, Iceland has always had it´s closest trade-ties with Europe. To change this in favor of an alliance with Russia, would mean a very difficult transition. Most Icelanders would be very disturbed by such a development. There is also the consideration that the country is indeed very vulnerable, with no means to defend itself against overt or covert war-fare by larger powers.

But the public opinion is so very much opposed to paying those Ice-save debts, and so is the majority of the Parliament, that it really is hard to say, what will happen. It could be, that the parliamentarians will give in to the pressure, or it could be that they will not pass the bill.
What happens, if they refuse to pass it, nobody knows. The future here, like everywhere else in the world is uncertain.

Follow up:
A closer look at Icelandic and other fires

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