Meltdown in Iceland


The financial virus developed on Wall Street is spreading. After driving many American banks to bankruptcy or nationalization, it has gone overseas. So far Europe has displayed the symptoms of mild flu, but experts warn it may quickly mutate into a lethal disease. Iceland, an island located between America and Europe, is already in a critical condition.

Only last year Iceland was listed as the fifth richest nation on earth. With the average individual income of over $42,000, the island attracted immigrants from all over the world, being pronounced by the United Nations the best place to live in. Although most of the 320,000 natives still worked in the fishing industry, their savings quickly multiplied due to investments in the then highly profitable American and European markets. Banks mushroomed in the capital, Reykjavik, and other large cities.

In its first phase, the crash on Wall Street left Europe intact, except for Great Britain and Iceland. For years the two island nations had lived in an economic symbiosis: private and national British companies, as well as individuals, heavily invested in Icelandic banks such as Landsbanki and Glitnir, which were supposed to be among the world`s safest institutions. Now they are teetering on the edge of bankruptcy with empty safes and long lines of angry customers at their branch offices in Iceland.

This left little room for maneuver for the British government. Prime Minister Gordon Brown invoked the anti-terrorist law and froze the Icelandic assets in Great Britain. In the last effort to save the island from financial collapse, Iceland`s government introduced its version of the Paulson Plan and nationalized Landsbanki and Glitnir. It scarcely helped; the country`s currency has lost one third of its value in comparison to last year`s figures. Most foreign workers who had arrived in Iceland in droves bought tickets back home.

Critical as it is, the crisis in Iceland pales in comparison with the situation in Zimbabwe. According to the figures obtained by the New York Times, this African nation`s inflation soared from 11 million percent in June to the astronomical rate of 231 million percent in July. Although the lack of any industry has made Zimbabwe immune to the global crisis, it has made foreign companies much less resolved to invest in the country of destitute millionaires. Meanwhile, the dictatorial president is still arguing with the opposition over a power-sharing deal.

More responsible than America, Europe still hopes to fight back the crash. European Union leaders are meeting next week to work out a common response to the plummeting stock exchanges and bankrupting banks. Individual states have already taken steps: Belgium and the Netherlands nationalized the Fortis bank while Ireland has given all its banks guarantees. Surprisingly, the countries of so-called New Europe – Poland, Slovakia, Bulgaria, among others – have strong economies, largely immune to the problems of their western neighbors. But even there stock exchanges have dropped to record low.

There is no panic as long as the global crisis affects only big companies and banks. But experts warn that should the current trend continue, it will bring down ordinary families who invested their savings in the shares of now bankrupt institutions. The right medicine must be prescribed to stop flu from developing into pneumonia. But where is the doctor?

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Krzys Wasilewski, while living in Poland, completing his masters degree in International Relations, was seduced by English Literature.