April 23, 2012 / 8:04 AM / 8 years ago

Former Iceland PM to learn if guilty in 2008 crisis

REYKJAVIK (Reuters) - The only politician in the world to stand trial for their role in the 2008 financial crisis will learn their fate on Monday when a court in tiny Iceland rules on whether the island’s former prime minister was grossly negligent or not.

Geir Haarde, Iceland's former prime minister, leaves the courthouse at the end of the first day, in Reykjavik March 5, 2012. REUTERS/Ingolfur Juliusson

In a verdict that many fear will do little to heal the wounds of the meltdown, a court will decide whether former prime minister Geir Haarde, 61, was personally responsible for failing to rein in the country’s banking sector before it imploded. Haarde, who faces four charges of gross negligence, has denied any guilt.

There is growing anger on the North Atlantic island with many Icelanders wondering why none of the men in charge of the banks that collapsed have been tried - even though a handful of charges have been brought and dozens of investigations are underway.

“Honestly, I hope they will sentence him to jail because we need it. He had warning signs years before it happened but he did absolutely nothing,” Hordur Torfason, a 66-year-old activist who led a protest movement after the crisis, told Reuters.

Torfason, whose movement helped unseat Haarde’s centre-right government in early 2009, added that a guilty verdict would be satisfying and that otherwise the trial would look like a whitewash.

The protests were among the biggest in Iceland’s post-war history and involved mass meetings of people clashing pots and pans outside parliament in downtown Reykjavik. They sometimes turned violent in a country renowned for its peaceful nature.

“We are trying to get an explanation of what happened, what went wrong ... if he is innocent, then it (the court) has been a show,” added Torfason, who said he has spent the last 11 months touring the world to speak about his protest movement.

Many believe an innocent verdict is more likely, however, and that such a verdict would do little to appease a widespread feeling of anger after the crisis.

On the other hand, a guilty verdict, which could lead to up to 2 years in jail, could raise questions about how just one politician could be responsible for a crisis that was emblematic of the global credit crunch.

“This is not a reckoning for the whole collapse,” said Egill Helgason, one of Iceland’s best-known television commentators. “The trial only showed they were in denial, and that they couldn’t do anything. Nobody has really assumed responsibility.”


People have complained that none of the trial has been televised, although Monday’s verdict will be broadcast live on TV.

Though the economy is recovering from the crisis and Iceland successfully completed a bailout program led by the International Monetary Fund, Torfason said people remained distrustful of state institutions.

Polls show that parliament currently has the support of only 10 percent of the public.

Iceland’s biggest banks were all taken over by the state in late 2008 after the credit crunch sparked by the collapse of Lehman Brothers froze their access to funds.

Iceland ring-fenced the banks’ domestic operations, letting their international operations go bankrupt.

Some economists have praised Iceland for letting the banks go under, though it remains in a dispute with Britain and the Netherlands over refunds for depositors in Landsbanki, an Icelandic bank that used to operate in those countries.

Capital controls are still in place, damaging the country’s economic recovery and analysts say the Icelandic people are more divided than ever before.

Einar Mar Thordarson, a political scientist at the University of Iceland, said the crisis had led to a general decline in confidence in government institutions.

“People are angry and of course there are a lot of families and people in financial difficulties,” he said.

Writing by Patrick Lannin; Editing by Andrew Osborn

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