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Archive for March, 2012

Glitnir WUB sues PwC Iceland – and PwC UK

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The Glitnir Winding-Up Board has sued not only PwC Iceland but also PwC UK, according to Ruv. This case is further in the process than an identical case that Landsbanki WUB is pursuing against the bank’s external auditors, incidentally PwC, due in court in June. The Glitnir case will come up in the Reykjavik District Court April 12.

Glitnir seems to be suing PwC for the 2007 accounts, which wrongly reflected risk assessment, loans to related parties (the weak point in all three banks according to the SIC report) and evaluation of the bank’s assets. All of this made the bank appear in a much better shape than it really was and caused damages of tens of billions of krona, possibly as much as ISK100bn, according to the WUB. The writ was presented to PwC on January 31. Following this action, PwC UK was presented with a writ from the Glitnir WUB.

As pointed out earlier, it seems logical that the auditors of all the banks will be presented with similar cases since the SIP report indicates similar shortcomings in all the banks. The really interesting question is if the Office of the Special Prosecutor will take action against the banks’ external auditors.

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Written by Sigrún Davídsdóttir

March 11th, 2012 at 3:09 am

Posted in Iceland

Icelandic bank auditors beware: Landsbanki’s auditors sued

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The Winding-Up Board of Landsbanki has sued the bank’s external auditor, PriceWaterhouseCooper, apparently for hundreds of millions of kronas in damages. The SIC report makes it abundantly clear that with so much wrong in the banks, their annual accounts were not much to rely on. And that raises serious questions regarding the auditors. Questions that the Landsbanki WUB has now formulated in a writ of 90 pages. It seems certain that other cases will follow. The question is if the Office of the Special Prosecutor will follow suit, bringing criminal charges against auditors.

The WUB clearly is of the opinion that already by the end of 2007 PwC knew the bank’s position was a lot more precarious than the accounts showed. According to a presentation to a Landsbanki creditors’ meeting in December 2010 the bank’s capital had fallen below the legal limit before its collapse in October 2008 – probably already before the end of 2007. The bank’s definition of “related parties” wasn’t correct, ia leading to over-risky loans to the bank’s largest shareholders, Bjorgolfur Gudmundsson and his son Bjorgolfur Thor. The presentation implied that the managers had given the auditors wrong information. Landbanki’s two CEOs have already been sued for damages caused to the bank.

According to Ruv, the WUB has now gone a step further, suing the auditors. The role of the banks’ auditors is scrutinised in the SIC report with many examples of highly questionable actions. It also raises questions, raised with international banks, on the relationship between banks and auditors.

By the end of 2007 Landsbanki had issued loans to father & son related companies and companies related to Jon Asgeir Johannesson, almost ISK200bn, now €120m. The WUB claims the auditors knew these loans either had no or insufficient collaterals. In spite of this and knowing that the bank was insufficiently capitalised the auditors went along with the managers in signing misleading and wrong annual and quarterly accounts.

If the accounts had been truthful the bank would have failed in 2007. Consequently, there would have been less losses resulting from Icesave UK, the Icesave in Netherlands would never have been opened and the over-all losses would have been less.

This case will no doubt be followed with great interest, not only in Iceland but also abroad. New York Attorney General is pursuing a case against Lehman’s auditors, Ernst & Young, for an alleged fraud involving a so-called Repo 105 transaction. Considering the evidence in the SIC report, the auditors for the two other Icelandic banks, Glitnir and Kaupthing, must already be pouring over their auditing and their relationship with the banks during the last years of the banks.

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Written by Sigrún Davídsdóttir

March 9th, 2012 at 10:50 pm

Posted in Iceland

The CBI loan to Kaupthing October 6, 2008 (updated)

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One of the more incomprehensible events in the Icelandic collapse saga is the loan of €500m issued on October 6 2008 by the Central Bank of Iceland to Kaupthing. The burning question is why this loan was issued.

The collateral was the Danish bank, FIH, which CBI became the unhappy owner of after Kaupthing failed. The whole FIH saga is a sorry saga in itself – the CBI sale of FIH has incurred huge losses for the CBI, €180-423m. It’s also unclear how much of the loss stems from the CBI’s bad handling of the sale.

But back to the 500m loan. It indicates that the CBI thought Kaupthing had a greater chance for survival than Glitnir and Landsbanki, which is why the CBI issued the loan. This was a fairly widely held public belief these days. But the CBI should have known better – on Friday October 3, the Bank of England had already taken measures to close down Kaupthing by taking over all deposits coming into the bank from that day. This clearly spelled the end for the bank. Didn’t the CBI know about the UK measures? Or didn’t it care?

By Monday October 6 it was clear that the banks had no chance of survival – the politicians and others had come to terms with the facts over the weekend – and that’s what PM Geir Haarde told the stunned nation in a televised speech at 4pm that Monday. It was also abundantly clear that one big risk factor was the banks’ inter-connectedness.

After the loan came to the light it was for quite a while unclear where the money went. The SIC report from April 2012 indicates that €200m were used to guarantee Kaupthing Sweden, where the Government stepped in for the bank (I actually thought the Swedish Government stepped in, making the Icelandic guarantee superfluous but perhaps I misunderstood something?). The rest? Apparently, it was divided between various other operations, in Luxembourg, Norway and Finland.

But here is another mystery, as far as I can see. Within Kaupthing’s management it was clear that the KSF operation in the UK was a central place in the Kaupthing universe. A failed KSF would cause cross-defaults, leading to the collapse of the Kaupthing Group. As far as I know, Kaupthing got this CBI loan for saving KSF – but none of the money went to the UK.

At the trial over Geir Haarde, the ex-PM was asked what happened to the money. He said it went to a different place than Kaupthing had indicated. Unfortunately, this wasn’t pursued by the prosecutor.

But most terribly regrettably, David Oddsson former Governor of the CBI wasn’t asked at the trial why the CBI issued this loan to Kaupthing, ia if those responsible at the CBI knew that the UK action against Kaupthing had already started, what Kaupthing’s motivation was for receiving the loan and if the CBI did anything to guarantee that the loan was used for its stated purpose.

This perhaps isn’t a big issue – but it’s one of the few completely murky events of these fateful days in early October 2008. Well, there is of course the offer of a Russian loan.

*In May 2010, Vidskiptabladid (in Icelandic) wrote that on Oct. 6 2008 Kaupthing lent ISK28bn to Lindsor, a BVI company that figured in other Kaupthing transactions. The CBI loan to Kaupthing that day amounted to ca ISK80bn. The Lindsor loan was apparently used to buy bonds from Kaupthing Luxembourg and other securities from Skuli Thorvaldsson and the bank’s key managers.

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Written by Sigrún Davídsdóttir

March 8th, 2012 at 5:35 am

Posted in Iceland

The Haarde Trial: some highlights from the first 3 days

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Although it’s tempting to think of the trial of ex-PM Geir Haarde as a national katharsis and a truth commission that’s not the case at all. There is one person on trial and that’s Geir Haarde. The witnesses throw their own light on facts and events and it’s of great interest to hear the different versions of events. Even though much of it is already known from the SIC report it’s interesting to hear the different persons recount different things. As is in the nature of the whole exercise, prosecutor Sigridur Fridjonsdottir uses the questioning to fill in and clarify documents, which have been collected.

The charges against Haarde are the following:*

1 A serious omission to fulfil the duties of a prime minister facing a serious danger

2 Omitting to take the initiative to do a comprehensive analysis of the risk faced by the state due to danger of a financial shock

3 Omitting to ensure that the work of a governmental consultative group on financial stability led to results

4 Omitting to guarantee that the size of the Icelandic banking system would be reduced

5 For not following up on moving the Landsbanki UK Icesave accounts into a subsidiary

The five charges against Haarde do steer the questioning but a whole range of issues has been touched upon.

During his day in court, Haarde underlined that by 2008 there was nothing that he as a PM could have done to prevent the collapse of the three banks – Glitnir, Landsbanki and Kaupthing. Any necessary measures would have taken too long – selling assets would for example have been impossible at the time – and he would hardly have had the support of Althing. The main point was also, said Haarde, how far the state should go to save private companies. Ia it transpired from Haarde’s testimony that the FSA was more reluctant to accept Icesave than has been thought earlier.

As is clear from the SIC report Minister of Banking at the time Bjorgvin Sigurdsson (soc.dem.) didn’t seem to have much understanding of what was going on in the banks and his co-ministers seem not to have trusted him. His testimony indicated much the same.

Arnor Sighvatsson was the chief economist at the CBI at the time. He said that already in 2005 – two years after the privatisation of Landsbanki and Bunadarbanki ended – the banks were facing problems and their CDS were rising. In hindsight, Sighvatsson said, already at that time there were some danger signals though only later did it become clear how poor the assets of the banks were and that they were financing the acquisition of their own shares.

Sighvatsson wasn’t aware of Icesave opening in the Nethelands (in May 2008) until later. At this time, said Sighvatsson, there was nothing the CBI could do. The FME should have acted on Icesave at the beginning. Deposits are a standard solution to lack of liquidity – the banks, met with suspicion already in 2005, lacked liquidity and Landsbanki turned to Icesave.

The prosecutor asked if Sighvatsson thought Landsbanki should have been required to put Icesave into a subsidiary. His answer was that since Icesave was set up to solve a liquidity problem and the lack of foreign liquidity putting Icesave in a UK subsidiary wouldn’t have solved the bank’s problem.

Lack of liquidity is like a heart attack, he explained, whereas lack of own capital is like cancer. In the end, a terminally ill cancer patient got a heart attack. People were hoping the liquidity problem would pass – now, said Sighvatsson, it’s clear there was never any of hope of that. If the state had lent to the banks, Iceland’s sovereign debt would be close to Italy’s.

Sighvatsson thinks that from the beginning the Icelandic banks were met with great suspicion abroad. In 2005, he attended at meeting with bankers from Barclays who already then were rattled by the rapid growth of the Icelandic banks and their lack of transparency. At the time, neither he nor Barclays knew of the poor quality of the banks’ assets. This suspicion eventually led to European banks stopping all lending to the Icelandic banks in 2006 but the banks saved themselves by borrowing from US banks.

Interestingly, said Sighvatsson, the banks didn’t seem to worry that their CDS shot up. They didn’t seem to care about the rates they had to pay on their loans.

Would asset sales have solved the problem in 2008? No, Sighvatsson thought that was out of the question. If the banks had sold their best assets they would have been left with only junk. Any buyers would also have conducted due diligence – and that would have thrown light on various things, Sighvatsson said.

No matter what, the banks were doomed and they had much better rating than they deserved – yet another indication of the colossal failure of the rating agencies.

In Iceland, David Oddsson widely seen as one of the main culprits in the collapse of the banks – as a PM in the 90s he led the privatisation of the banking system and shaped the political climate at the time. A climate both favourable to and uncritical of the banks. And he was a Governor of the CBI in the critical time from 2005-2009.

The thrust of his testimony was that he had been very worried for a long time but his views had not been appreciated within the bank. – This is interesting, considering how worried and critical Sighvatsson evidently was. It’s been said that Oddsson was isolated within the CBI, not necessarily because of his views but because he wasn’t an economist and didn’t know how to steer this machine that a central bank is.

He himself underlined that he wasn’t the only governor – there were three – but says that by 2007 his colleagues agreed with him. Anyone used to reading central bank reports, he said, should have seen that the CBI was issuing warnings. Oddsson said that for a long time he didn’t believe the infrastructure of the banks was weak. After all, their accounts were signed by the banks’ managers and the leading auditing firms. There didn’t seem to be any reason to distrust them.

An insight into little Iceland: Oddsson said that after he stepped down as a PM there were fewer meetings between the PM and the CBI governor. There was less formality because Haarde and Oddsson had known each other since they were kids.

Oddsson said that the crisis in 2006 had been a close call – the PM at the time Halldor Asgrimsson had called him one weekend, telling him that the banks would all fail the following Monday. That’s what the CEOs themselves thought, said Oddsson. But the banks did survive in the end. This had taught Oddsson that things might be a lot more precarious than they appeared and move swiftly.

Oddsson said that Ingibjorg Solrun Gisladottir leader of the Social democrats and Minister of Foreign Affairs had suggested the state should lend €30-40bn to the banks. That would have killed the Icelandic state, said Oddsson. – As far as I know, this is news; Gisladottir will be a witness later and must address this point since it won’t do her political legacy much good.

Following the acute 2006 crisis the CBI tightened its liquidity control and posed serious questions to the FME regarding the cross-ownership and cross-lending of the banks. Not until the collapse of Glitnir was it clear how loosely the FME defined “related party,” the banks’ lending beyond legal limits to their biggest shareholders and how the banks were lending each other. Oddsson says he never hid his opinion that the FME was much too weak to put up any fight with the banks.

Oddsson is a known humorist. It caused some laughter when he pointed out that Landsbanki didn’t define the bank’s largest shareholders, the father-and-son duo Bjorgolfur Gudmundsson and Bjorgolfur Thor Bjorgolfsson, as “related parties” – and that he had once asked Gudmundsson’s wife is she didn’t find this embarrassing.

In February 2008 Oddsson had met abroad with foreign bankers and rating agencies, which made him very alarmed over the situation in Iceland. Back home he tried to communicate this anxiety but realises in hindsight that the banks were already beyond salvation and there wasn’t much the Government could have done. Though the banks were complaining that they could only borrowed in ISK it later transpired that by getting loans from the ECB their euro loans were indeed higher than their ISK loans. These were smart men, Oddsson said.

Asked about a letter from Mervy King in spring 2008 where King refused a currency swap but offered some help – Haarde said on Monday that the offer from King was never refused; it just wasn’t reacted on in Iceland – Oddsson said that this offer had just been a bit of “nicety.” The main thing was the refusal of doing a swap.

It seems clear both from Oddsson and Sighvatsson’s testimonies that not even at the beginning of Icesave, in autumn 2006, did Landsbanki have the assets to back up Icesave in a UK subsidiary. Much less was this possible in 2008. Landsbanki complained bitterly over the FSA demands. Oddsson said that Landsbanki Iceland clearly didn’t have assets that would have satisfied the FSA and even if it did, the transfer would have weakened the bank in Iceland.

Jon Th Sigurgeirsson, who became head of the Office of the board of Governors at the CBI in April 2008, said that already in November 2005 it was clear where the Icelandic banks were heading because he heard that foreign banks were ready to short-sell Icelandic bank shares. He also pointed out that it’s incredible how renowned auditors could sign the audit of the banks.

In a few words: The above is just a much digested version but it’s clear that the real problem of the Icelandic banks wasn’t lack of liquidity – they were short of capital. They had massively eroded their own capital by lending to buy shares in themselves. This didn’t start in 2008 as a way to save the banks – this tendency had started earlier. The feeble standing of the Icelandic banks is an indictment over those foreign banks that lent them money, the rating companies and the auditing companies.

It seems that from the beginning Landsbanki didn’t have the assets to back up Icesave in a UK subsidiary. The FSA wasn’t tough enough in dealing with Landsbanki. The Icelandic FME was of the opinion that it couldn’t stop the accounts. It’s absolutely incredible that the Dutch FSA allowed Landsbanki to open Icesave in the Netherlands in May 2008. It can’t hid behind EU rules – certainly, the EU passport rules can’t set a lower limit than the home banks have to follow (I understand that these rules have now been changed).

By 2008 the banks couldn’t be saved – but the question is why they were allowed to become so big, relative to the Icelandic economy, considering how weak they were already in 2006. It’s not unique in a country that the banks are beyond and above the political power but it’s unique that the banks, which had demonstrated their weaknesses early on, were still allowed to grow so wildly.

Oddsson was sure that the Icelandic Deposit Guarantee Scheme didn’t apply to Icesave. Others have been less clear on it – but even though many understood the implication for the Icelandic economy, no one seems to have done anything to clarify how these matters stood.

*Revised from an earlier blog.

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Written by Sigrún Davídsdóttir

March 8th, 2012 at 4:39 am

Posted in Iceland

The latest from IMF on Iceland: much achieved but risks ahead

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Here is the IMF concluding statement of the IMF mission after the 2012 Article IV Consultation on Iceland. The short version is this:

March 2, 2012

Iceland has achieved much since the crisis and its economy is growing again. Nonetheless, considerable challenges remain. Tackling these will require steady policy implementation, increased coordination, and stronger policy frameworks.

Outlook and Risks

The outlook is for a moderate recovery. Over the medium-term, the drivers of growth will gradually shift away from domestic demand (notably investment) toward external demand (as exports increase). However, there are risks to this outlook, emanating from both external and domestic sources.”

To read more, click here.

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Written by Sigrún Davídsdóttir

March 7th, 2012 at 6:28 am

Posted in Iceland

The trial over ex-PM Geir Haard (updated)

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Monday March 5 was the first day of trial against Geir Haarde, Iceland’s Prime Minister June 2006 – Februar 2009. Haarde is being tried by a special court, “Landsdómur,” never before convened in the history of Iceland. This court’s only function is to try ministers and is modelled on the Danish legal system.

The trial has been covered by the world media, ia by the BBC, Guardian and Sky.

The five charges brought against Haarde regard alleged omissions in office and are the following:

1 A serious omission to fulfil the duties of a prime minister facing a serious danger

2 He didn’t take the initiative to do a comprehensive analysis of the risk faced by the state due to danger of a financial shock

3 He omitted to ensure that the work of a governmental consultative group on financial stability led to results*

4 For omitting to guarantee that the size of the Icelandic banking system would be reduced

5 For not following up on moving the Landsbanki UK Icesave accounts into a subsidiary**

Regardless whether people think it’s fair to indict only one minister it is already clear after the first two days that the trial will provide an interesting insight into a whole range of issues related to the collapse of the banks. Although the setting and the purpose differ, in Iceland the court hearings are being compared to “a truth commission” since it will give the general public the possibility to hear what politicians, civil servants and bankers have to say on the various issues in question.

Unfortunately, the court has decided against broadcasting the hearings. There are only ca 40 places available in the court hall for the media and the general public to share. The court has been asked to reconsider its decision. The hope is very much that it will change its mind.

On the first day, Haarde was questioned for eight hours. Tuesday, witnesses were called in for questioning. Below is a list of the witnesses published by the court:

Monday March 5:

Geir Haarde

Tuesday March 6:

Bjorgvin Sigurdsson former Minister of Trade

Arnor Sighvatsson former chief economist, CBI

David Oddsson former Governor of the CBI

Wednesday March 7

Ingimundur Fridriksson former Governor of the CBI

Baldur Gudlaugsson former permanent secretary of the Ministry of Finance

Bolli Thor Bollason former permanent secretary of the Prime Minister’s Office

Aslaug Arnadottir former head of department in the Ministry of Trade and chairman of the board of the Deposit Guarantee Fund

Jon Sigurdsson former chairman of the board of the FME and member of the board of the CBI

Jon Th Sigurgeirsson head of the Office for the Board of Governors of the CBI

Thursday March 8:

Jon Thor Sturluson former assistant to the Minister of Trade

Jonas Fr Jonsson former director of FME

Jonina Larusdottir former permanent secretary of the Ministry of Trade

Hreidar Mar Sigurdssonr former CEO, Kaupthing

Gudjon Runarsson director of the Icelandic Financial Services Association

Runar Gudmundsson head of the Insurance Department FME

Thorsteinn Mar Baldvinsson former chairman of the board at Glitnir

Friday March 9:

Sigurdur Sturla Palsson former head of CBI’s International Department

Tryggvi Thor Herbertsson former economic adviser to the Government

Vilhelm Mar Thorsteinsson former head of treasury, Glitnir

Heimir V Haraldsson former member of Glitnir ResCom

Johannes Runar Johannsson former member of Kaupthing ResCom

Larentsinur Kristjansson former chairman of Landsbanki ResCom

Vignir Rafn Gislason certified accountant PWC

Kristjan Andri Stefansson former head of department, Prime Minister’s Office

Sylvia Kristin Olafsdottir former head of contingency planning, CBI

Ossur Skarphedinsson former Minister of Industry

Johanna Sigurdardottir former Minister of Social Affairs

Monday March 12:

Ingibjorg Solrun Gisladottir former Minister of Foreign Affairs

Sigurdur Einarsson former chairmand of the board, Kaupthing

Larus Welding former CEO Glitnir

Stefan Svavarsson chief accountant CBI and member of the board, FME

Halldor Kristjansson former CEO Landsbanki

Sigurjon Arnason former CEO Landsbanki

Bjorgolfur Gudmundsson former chairman of the board, Landsbanki

Tueday March 13:

Tryggvi Palsson former head of financial stability, CBI

Gudmundur Jonsson head of lending, FME

Jon Thorsteinn Oddleifsson former head of treasury, Landsbanki

Sverrir Haukur Gunnlaugsson former Icelandic ambassador, UK

Arni M Mathiesen former Minister of Finance

Sigridur Benediktsdottir member of the SIC

Tryggvi Gunnarsson member of the SIC

Atli Gislason member of Althing

Birgitta Jonsdottir member of Althing

Eyglo Hardardottir member of Althing

Lilja Rafney Magnusdottir member of Althing

Magnus Orri Schram member of Althing

Oddny Gudbjorg Hardardottir member of Althing

Steingrimur Sigfusson member of Althing

As this list show, both Prime Minister Johanna Sigurdardottir and Minister of Economic Affairs Steingrimur Sigfusson will appear before the court. It’s also an intriguing thought that bankers Sigurdur Einarsson, Hreidar Mar Sigurdsson and Larus Welding have already been indicted by the Office of the Special Prosecutor. The two CEOs of Landsbanki have been sued by the bank’s WUB and will most likely, at some point, be indicted by the OSP. The first OSP case ruled on by the High Court was against Baldur Gudlaugsson who recently was sentenced to two years in prison for insider trading.

Last but not least, Bjorgolfur Gudmundsson might have a flash back when he takes place before the court: it was in this same hall that Gudmundsson, together with his son Bjorgolfur Thor Bjorgolfsson and their business partner from St Petersburg Magnus Thorsteinsson, signed the agreement to buy 42% of Landsbanki in January 2003.

*The consultative group was comprised of civil servants from the Prime Minister’s Office, the Ministry of Finance, the Ministry of Business Affairs, the FME and the CBI. It was founded with a written agreement on February 21 2008. Its remit was financial stability and contingency planning. On its purpose and work see the executive summary of the SIC report. – I will be following the trial, unfortunately from abroad, but will try to bring a short digest of interesting testimonies.

**The charges have been updated from an earlier version.

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Written by Sigrún Davídsdóttir

March 7th, 2012 at 6:18 am

Posted in Iceland

The presidential puppet master

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When president Olafur Ragnar Grimsson gave his New Year speech January 1 Icelanders were waiting in suspense. Was the president running for election the fifth time or was he stepping down? Then came this:

My conclusion may sound like a paradox; it is, nevertheless, that the situation in Iceland is now such that I can be of greater assistance if my choice of action is subject only to my own will, free of the restraints which the office of the Presidency always imposes on speech and action. Without the duties of a head of state on my shoulders, I shall have more scope to devote energy to cherished goals and causes that have long been dear to me; I shall be able to make a contribution of a different kind towards progress and prosperity, science, research and economic activity. New avenues will open up for me to support the battle against climate change and to promote the use of green energy, to develop collaboration in the circumpolar region and foster our relations with leading nations in 7 other parts of the world, and to expand the opportunities open to our young people and support democracy in our society. Thus, my decision does not mean a farewell, but rather the beginning of another journey, a new phase of service to the ideals that have long guided me; at greater liberty to act and enriched by the experience which service as President brings to every individual chosen by the nation.

Grimsson clearly thought that Iceland and Icelanders were in a good place and he, as the paternal figure, could safely leave his children on their own. Icelanders nodded, saying that well, this was it – the president was going to leave office. Some were surprised that he was stepping down instead of setting a new record of time in office. Others said that clearly he was going to leave little Iceland to explore his global opportunities in the market for former presidents.

After a few days, people woke up to the thought why the president hadn’t said more clearly that he was leaving. His predecessors had, at this point in their career, declared that they were not running for office again. Clear and unequivocal. Not Ragnarsson. He didn’t say he wasn’t running. Just that he had other things to attend to.

People started debating what he had meant: was he or wasn’t he running again? Why hadn’t he said these words “not running again.” The president was asked what he really meant. He didn’t want to say. He just meant what he had said – but that didn’t really answer the question, which is why it was being asked again.

Some thought it utterly unbearable to see him go. No one else could possibly such a good president. No one else could be the president of Iceland. An ad hoc group led by former ministers Gudni Agustsson (Progressive Party) and Ragnar Arnalds (from a left party no longer existing) set up webpage for people to sign the following petition: “We signees challenge you, Mr Olafur Ragnar Grimsson, to run for office this summer. We trust you better than any other person to protect the interests of the people in this country in the difficult times ahead.”

The first flood wave of signees dried up very quickly. A week ago, Agustsson handed Grimsson 31.000 signatures. “I can’t hide,” Grimsson said, “that such an occasion wasn’t in my mind nor was it part of what I had thought would happen, especially not after my New Year’s speech at the time.” Contrary to earlier presidents, he said, there was an obvious will among the people to keep him – a rather insulting remark towards his predecessors.

Grimsson took a whole week to ponder on his next move but today the suspense ended (his statement, only in Icelandic): in spite of what Grimsson calls his “clear words” in the New Year’s speech he now bows to the will of so many Icelanders and is running again, adding: “It’s my sincere wish that the nation will understand that when there is again a constitutional and governmental stability in the country and our standing among the nations is more clear I will decide to turn to other projects before the end of term, so presidential election might then be held earlier than anticipated.” – The short and concise meaning of this that he is staying until a better offer pops up.

Abroad, he champions himself as a leader who paved the way for the democratic process  in Iceland, portraying the Icesave referenda as a “yes” or “no” to bailing out the banks. In Iceland, many remember him being a willing host to bankers and business men, literally their fellow traveller, and an avid messenger of the innate and superior brilliance of Icelandic banking and business acumen.

By his little show, the presidential puppet master has, yet again, shown himself to be a master plotter, this time playing on many strings. By creating the uncertainty of him running or not he has kept other possible candidates at bay. Or discouraged them to step forth. It’s long been clear that he is not in favour of Icelandic membership of the European Union and, having vetoed the Icesave agreement twice, he feels he has saved Icelandic democracy.

Any candidate will have to declare his standing on both issues, which means that, unless he is the only candidate, the election will ia be on Icelandic EU membership and Icesave. This is the clearest evidence of the changes of the presidential office Grimsson has instigated during his presidency: from a formal but non-political office to just the opposite.

In his New Year speech, Grimsson talked about going on a new journey. Right he was. It’s a new journey. But it’s not a journey he’s undertaking by himself. He’s taking the whole of Iceland along. It remains to be seen where this journey leads to – and if there is any credible candidate that can make Icelanders leave Grimsson by the roadside. For the moment, Grimsson is pulling all the strings.

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Written by Sigrún Davídsdóttir

March 5th, 2012 at 3:46 am

Posted in Iceland