It is a vacuum out there.

After a year and a half of turmoil and drama, things are sort of in-between at the moment in Iceland. The national referendum and its underwhelming effects seem to have let a lot of hot air out of the system and left things in limbo for now. Sigmundur David Gunnlaugsson is nowhere to be seen, and the Independence Party seems to have adopted a policy of keeping mum to avoid losing the advance it seems to have in the city elections in Reykjavik. Instead the Confederation of Icelandic Employers and the Federation of Icelandic Fishing Vessel Owners have been left to keep the pressure on the government at any step. But still with the foot just lightly on the pedal, as they have promised to step on it in and run the government over in the autumn. Your average Jon and Gunna could care less for now, they are more concerned with eating chocolate Easter eggs and travelling as far away from any news media for the holidays as is humanly possible.

Meanwhile, pressure grows beneath Icelandic society, much like in Eyjafjallajokull where the volcano has been hogging the headlines for the past two weeks.

The story goes that there is a second crash looming and it is due later this year. The more dramatic of those prescient pundits even have a date ready, October 10, 2010.

10.10.10

It is not certain whether Roland Emmerich has a keen interest in Icelandic economic and political matters but the theory goes that by then the indebted households and businesses of Iceland will have been pushed past the limits they are currently operating within. Years of high interest rates and gruelling debt will start to tell for businesses that can only push their liabilities onto their paying customers for so long. Another sign of things being upside down in Iceland is the leftist prime minister Johanna Sigurdardottir promising severe cuts to be made in the bloated government left behind by the right wing politicians from years past.

The national referendum has not delivered what so many hoped it would, and some of us said it wouldn’t, a sympathetic wave across the world for Iceland. Holland and Britain appear to be in no hurry to negotiate a new deal. They can wait for now until Iceland gets its act together in presenting a united negotiating team. Meanwhile the IMF loans are uncertain if you would believe Dominique Strauss-Kahn who said recently that there might not be sufficient support for a loan to Iceland within the fund. Many dare not say so out loud but further IceSave and IMF delays could be disastrous for Iceland come autumn. Read between the lines and Mar Gudmundsson, Central Bank Governor and Jon Danielsson, LSE economist are whispering the unmentionable. Iceland needs to get its act together or expect a turn for the worse.

Iceland’s foreign policy and international relations are in a mess. Apart from the Social Democrats (who want Iceland into the EU), none of the political parties have produced plans to revive and enhance the country’s reputation and standing in the world. The other party in government appears to be on its way to becoming a haven for isolationists and the Independence Party and Progressive Party have yet to provide a credible road map for the country because of internal strife between special interests and ordinary party members. A scared and confused nation seems likely to vote against EU membership, but what will then become of Iceland’s participation in the EEA? With the country already operating under exemptions from the four freedoms through the currency restrictions, what benefits would Europe see in Iceland’s inclusion if the nation does not want to participate with the benefits and responsibilities associated?

Voters are confused for sure. The Best Party, running on a satirical campaign with popular comedian Jon Gnarr looks like it might get two places in Reykjavik City council? Is that alright, asked a political science professor last week? He should be more concerned with the 40% of those who took a stand in the latest poll and want to reward the Independence Party for its work on behalf of FL Group and Landsbankinn in the last few years. And then there are 40% who are undecided! As one political science professor remarked earlier in the winter, people are more interested in politics than before but less interested in politicians.

The economic disaster was a political catastrophe of course. In the aftermath of October 2008, various people were making comparisons with the downturns of Finland and Sweden in the 1990′s and literally said, “in two or three years when we will be on the up again…then”. But comparisons with different countries, different economies, different political landscapes are speculative at best, ignorant at worst. Sweden and Finland ended up in the European Union. There was a political and economic action which took place in those countries. The government has done much more than it is being given credit for but it is up against the wall in so many areas and appears to be crippled in too many ways. Right and left wing nutjobs can still be found who bemoan that while other economies spend their way out of recessions, this government is cutting down, failing to mention that the level of debt in the economy makes it impossible to adhere to “normal” economic laws. Ideological issues such as closing down strip clubs (left wing) and pushing for casinoes (right wing) are given priority over economic and international matters while enough confusion still reigns to avoid a calm and enlightened debate.

Last month I went to my bank and got 2.3 million knocked off the 20 million ISK I owed for my original 16.7 million apartment. Meanwhile a friend got 40 million knocked off the 90 million he owed for his original 45 million currency loan as he sold his apartment for 55 million and is completely off the hook. Another economic law turned on its head, while those who take the largest risks in Iceland reap the highest rewards, the never suffer the biggest losses. The fishing lobby now needs 200-300 billion ISK written down and is ready to do anything it takes to get those write offs without relinguishing the ownership of those who got the industry into such debt.

Maybe 10.10.10 is unavoidable.

Related posts:

1. No To Useless Government “Solution”
2. A 110% Folly
3. For The Love Of Baugur’s Money
4. InDefence Honored By Young Independence Party Members
5. MP’s Two Million ISK Payment For Mishkin Report