:00:10. > :00:17.Burma's campaigners. Now it is time for HARDtalk.
:00:17. > :00:22.Three years ago, Iceland was on its knees. A tiny nation ruined by
:00:22. > :00:28.financial hubris. Today its economy is growing again, anger and despair
:00:29. > :00:32.are now tempered by tentative signs of recovery. But there is a problem.
:00:32. > :00:36.Iceland has not paid the bill for the financial havoc caused by its
:00:37. > :00:42.risk-addicted banks. My guest today is Iceland's finance minister,
:00:42. > :00:47.Steingrimur Sigfusson. If Iceland is serious about seeking EU
:00:47. > :00:57.membership, isn't it time to get serious about meeting its
:00:57. > :01:13.
:01:14. > :01:17.Steingrimur Sigfusson, in Reykjavik, welcome to HARDtalk. Good morning.
:01:17. > :01:21.My first question for you, I referred to the meltdown in Iceland
:01:21. > :01:26.three years ago, what is the state of the economy today? Are you still
:01:26. > :01:31.in intensive care are ought -- for our new recovering? We're
:01:31. > :01:35.definitely recovering and making a lot of progress. We successfully
:01:35. > :01:39.completed the IMF standby arrangement programme this end of
:01:39. > :01:43.August. We re-entered the international capital markets in
:01:43. > :01:49.the June and successfully issued $1 billion. There are many signs both
:01:49. > :01:54.internally and also externally proving that Iceland has come a
:01:54. > :02:00.long way since October 2008. But of course the problems are not over.
:02:00. > :02:05.We're not out of the woods entirely. This has not come without sacrifice
:02:05. > :02:10.and cost to the Icelandic population. We will talk about
:02:10. > :02:15.sacrifice and cost in a moment but sticking with the notion that you
:02:15. > :02:20.have staged a remarkable recovery. You have got growth expected it of
:02:20. > :02:26.2.5% this year. Many people in the EU would regard that as a triumph
:02:26. > :02:29.right now. It is that contrast with the EU that I am interested in. You
:02:29. > :02:32.in Iceland have taken decisions over the past three years that
:02:32. > :02:39.would have been impossible inside the EU. Do you think that there is
:02:39. > :02:44.a lesson there? You are right. In terms of having our own currency
:02:44. > :02:48.that has devalued and created a very handsome, competitive
:02:48. > :02:55.advantage for our exports and competitive industries. That is one
:02:55. > :02:59.factor. Also through these the economy adapted very quickly to
:02:59. > :03:06.changed circumstances. We also ran a rather UN traditional programme
:03:06. > :03:13.with the IMF and did it our own way. It's we are protected our message
:03:13. > :03:20.in such a way to bring the as line -- the Icelandic society as softly
:03:20. > :03:24.as possible through this. We are a Nordic society after all and we
:03:24. > :03:29.want to prove that. In many ways it has helped Iceland to be small,
:03:29. > :03:33.independent. After all, it is quicker to turn a small boat around
:03:33. > :03:39.then a big ship. And to have our own tools and beans to work
:03:39. > :03:43.ourselves out of this. It has made a difference. Some would say that
:03:43. > :03:48.it has helped being small and adaptable, but it has also helped
:03:48. > :03:52.in a way, being irresponsible. Unlike a country like Ireland,
:03:52. > :03:56.which saw an obligation as a state to take on the terrible debts of
:03:56. > :04:03.his private banks, Iceland took a very different view and said to the
:04:03. > :04:08.banks, you go past, we will not bail you out. This had nothing to
:04:08. > :04:13.do with irresponsibility. The fact of the matter was the banks were
:04:13. > :04:19.far to cook -- fight to beat for the small economy of ice plant to
:04:19. > :04:25.even attempt to rescue them. -- the economy of Iceland. It was not a
:04:25. > :04:29.matter of free choice. It was simply like this. The banks, with
:04:29. > :04:33.extensive international operations, and with a balance sheet about ten
:04:33. > :04:38.times the economy of Iceland, it was totally impossible that we
:04:38. > :04:43.could have rescued them. It was real irresponsibility of the
:04:43. > :04:49.political class of a whole, of which you are a part, to let that
:04:49. > :04:53.happen in the first place. You were living in a fantasy land. We did a
:04:53. > :04:57.lot of mistakes in the year leading up to the collapse of the banks. We
:04:58. > :05:00.have looked that in the eye. We have looked in the mirror. We had a
:05:00. > :05:05.very thorough investigation launched by the parliament that
:05:05. > :05:10.showed us the weaknesses, the mistakes that were done in the
:05:10. > :05:14.years before. I am not saying that we are not, that we do not carry
:05:14. > :05:20.responsibility. But when it comes to the banks, Iceland did not have
:05:20. > :05:23.a choice. We had to do something along the lines that we dig in
:05:23. > :05:31.October 2008 when we pulled the emergency law in place to avoid a
:05:31. > :05:36.total meltdown of the Icelandic economy. It would not have helped
:05:36. > :05:41.anybody if Iceland had completely fallen apart. The rescue operation
:05:41. > :05:46.since October 2008 at the end of the day will also benefit those who
:05:46. > :05:52.had lent Iceland Bunny. objected to my use of the word,
:05:52. > :05:55.irresponsibility. But if you do not mind I will stick with that word.
:05:55. > :06:03.You have received as a nation over the last three years billions and
:06:03. > :06:10.billions of dollars in support from the IMF, the EU, the Nordic
:06:10. > :06:15.countries, the UK, the Netherlands and Germany. As a result your
:06:15. > :06:19.economy is showing signs of improvement. But as the economy
:06:20. > :06:25.improves, you do not appear to be prepared to assume the
:06:25. > :06:31.responsibilities to those people who Iceland still owes money to.
:06:31. > :06:38.must correct you. We have not got a single penny from the EU. On the
:06:38. > :06:43.contrary. Individual member states of the EU have given money, or at
:06:43. > :06:48.least financial guarantees. It is like this. We entered the IMF
:06:48. > :06:52.programme and got some funding from them, and then the Nordic countries,
:06:52. > :06:55.and Poland and the Faroe Islands contributed to financing the
:06:56. > :07:00.programme. Nobody has given us anything. These are loans we will
:07:00. > :07:09.fully repay. When it comes to the dispute between the ice land, the
:07:09. > :07:17.UK and the Netherlands, that has been a difficult case. It's but
:07:17. > :07:24.what we did in October 2008 through the emergency law was to safeguard
:07:24. > :07:30.the depositors of failed banks as much as possible. We made the
:07:30. > :07:36.deposits the priority. The good news is that the economy -- the
:07:36. > :07:41.recovery is improving. The least as -- the latest figures are 100%. It
:07:41. > :07:51.is almost certain that in the coming years the whole principle
:07:51. > :07:52.
:07:52. > :08:02.amount will be repaid. That is not the point. There has been a report
:08:02. > :08:03.
:08:03. > :08:07.from the surveillance Authority. The point ears, the rules down you
:08:07. > :08:13.to pay 20,000 euros compensation to any depositor who lost money in an
:08:13. > :08:17.Icelandic bank. You did not do that. It fell to the British and
:08:17. > :08:21.Netherlands governments because you would not do it. The EU now bio
:08:21. > :08:31.millions of dollars, billions I should say, to the UK and
:08:31. > :08:33.
:08:33. > :08:37.Netherlands, but you are refusing to say it -- to pay. It is like
:08:37. > :08:42.this. We were not in the position. The bank failed and it could not
:08:42. > :08:48.pay out. We were not in the position immediately after to pay
:08:48. > :08:56.out that money. The UK and the Netherlands authorities decided to
:08:57. > :09:00.do so themselves. They calm things down. We have all the time being
:09:00. > :09:05.willing to try to negotiate to try to find a solution to this. But we
:09:05. > :09:09.have pointed out that nowhere in this directive or anywhere in the
:09:09. > :09:13.European regulations does it state that there is a state guarantee
:09:14. > :09:17.behind this. That legal dispute has been at the core of this all the
:09:17. > :09:21.time. But the rulings have gone against you. They have looked at
:09:21. > :09:25.this carefully. You objected. The most recent ruling from the
:09:25. > :09:33.ultimate surveillance Authority is that you were wrong and they had
:09:33. > :09:37.given you three months to meet your obligations. Will you do it?
:09:37. > :09:42.disagree with the surveillance Authority. Now the case rests with
:09:42. > :09:48.them. But as I say, the good news is that payments will start soon
:09:48. > :09:54.and the principal amount will be recovered from the bank. You do not
:09:54. > :09:59.know that. You cannot be quite sure what the assets are and you cannot
:09:59. > :10:04.be quite sure whether they will meet the real, huge numbers that
:10:04. > :10:09.you owed to the UK and the Netherlands. And indeed to town
:10:09. > :10:12.councils to the UK who are crying out for finance, and they have many
:10:12. > :10:22.millions of dollars locked in Icelandic accounts which are now
:10:22. > :10:27.
:10:27. > :10:36.been collected and the outlook is good. We are optimistic that the
:10:36. > :10:40.recovery will be 100%. The deposits are the main priority. By making
:10:40. > :10:45.them priority claims, we safeguarded the depositors,
:10:45. > :10:53.including the British communities and charities, including what the
:10:53. > :10:58.UK and Netherlands authorities paid out, including the top pops. In all
:10:58. > :11:01.fairness, this should be looked at as well. Without getting too
:11:01. > :11:06.technical, you cannot even guarantee that they will be
:11:06. > :11:13.priority creditors, because other creditors are now looking at that
:11:13. > :11:18.pile of money that the bank will eventually have to pay back and
:11:18. > :11:23.saying, why give priority to the depositors and councils and
:11:23. > :11:28.charities? They want a piece of it. You cannot be sure that they will
:11:28. > :11:33.not win their legal argument. are right. We will get a court
:11:33. > :11:38.ruling on this any day now. All we are optimistic that it will for our
:11:38. > :11:42.way. The District Court of Reykjavik will confirm the validity
:11:42. > :11:46.of this law. But I would like to mention there is another side to
:11:46. > :11:53.this. If we're going deeply into the contact between the UK and
:11:53. > :11:58.Iceland, the actions taken against us in the UK in October 2008 were
:11:58. > :12:04.very harmful for ice land. They froze out assets using anti-
:12:04. > :12:10.terrorism law. We have just got a report showing what this cost the
:12:10. > :12:15.general Icelandic businesses -- businesses. It's there potential
:12:15. > :12:25.trade was broken. They suffered a loss of reputation. The figures
:12:25. > :12:26.
:12:26. > :12:34.amount to something something -- to something like $5 billion. I am
:12:34. > :12:41.speaking both about... With respect, should not the Icelandic people as
:12:41. > :12:46.a halt realise that they hacked to take a huge hit because of the
:12:46. > :12:49.collective responsibility -- irresponsibility that believed it
:12:49. > :12:54.could become a major player in international banker. Every single
:12:54. > :12:58.person in your country had to pay a price for that. Yes. And there is
:12:58. > :13:04.not much fairness in that. The ordinary people in Iceland and
:13:04. > :13:07.guilty of nothing in this respect. But you are right. The leaders, in
:13:07. > :13:13.banking, in businesses, they carry a huge responsibility for the
:13:13. > :13:18.things that happened in Iceland. I am not trying to blame anybody else.
:13:18. > :13:22.We must face the fact that we carry the main responsibility. I was
:13:22. > :13:27.Leader of the Opposition in the years leading up to this. I tried
:13:27. > :13:33.to warn and criticise but there were very few of us and we were not
:13:33. > :13:38.much listened to. I want to stop you there. We will get two more of
:13:38. > :13:43.your political thoughts in a minute. Let's focus on the immediate future
:13:43. > :13:47.and the European Union. You have said that you do not recognise the
:13:47. > :13:50.rules which the surveillance Authority has imposed on you when
:13:50. > :13:54.it comes to paying back the debt. You say you do not recognise those
:13:54. > :13:58.rules. In that context, how on earth can Iceland proceed with an
:13:58. > :14:08.EU membership application when you are not even agreeing to be bound
:14:08. > :14:09.
:14:09. > :14:11.by the rules of the EU economic space that you currently reside in?
:14:11. > :14:18.It is a disagreement about interpretation. The courts will
:14:18. > :14:27.sort that out. It's that is not the first time in the world's history
:14:27. > :14:31.that you disagree on interpretation Iceland is trying to convince the
:14:31. > :14:35.European Union that you want membership. You need to dig a
:14:35. > :14:39.little bit deeper into the Icelandic psyche. You do you want
:14:39. > :14:43.to be members of the European Union at all. He wanted a bit of short-
:14:44. > :14:48.term protection. You decided to appeal to the European Union for
:14:48. > :14:56.membership. Now that things have gotten better people have decided
:14:56. > :15:02.that they have a lot of very sticky Rolls. -- roles. The question of
:15:02. > :15:07.membership has always been a very controversial one. It has nothing
:15:07. > :15:15.to do with how we stand economically for the time being. It
:15:15. > :15:21.will always be a very controversial case for Iceland. This is because
:15:21. > :15:28.of our vital interest in the agricultural and officially sectors.
:15:28. > :15:35.-- fisheries. Once you have a clear interpretation that is not disputed,
:15:35. > :15:42.no-one is talking about anything else. There is a dispute. That
:15:42. > :15:52.needs to be sorted out. No way in the directors' does it stand that
:15:52. > :15:53.
:15:53. > :15:57.there is a state guarantee behind the deposits. You explained that.
:15:58. > :16:02.You try to tell me that is simply a technical difference. The European
:16:02. > :16:12.Union application will go ahead. But just get down to the nitty-
:16:12. > :16:13.
:16:13. > :16:22.gritty. You personally believe it would be a mistake, don't you?
:16:22. > :16:27.My party do not think it will be beneficial for Iceland to join.
:16:27. > :16:33.That would be at the Oreste donation. This question has to be
:16:33. > :16:43.solved. Havel future relations between the Iceland and the
:16:43. > :16:43.
:16:43. > :16:53.European Union be and in what form? We are members of the market but
:16:53. > :16:54.
:16:54. > :17:03.not a full member. So we can have our Fisheries and agricultural.
:17:03. > :17:13.us go to the reasons for membership. Many believe it the idea isn't
:17:13. > :17:15.
:17:15. > :17:21.saying. -- is insane. You're talking about radical reform of the
:17:21. > :17:26.banking system. You would have to play by the EU's rules. You get to
:17:26. > :17:31.fisheries. 200 mile fishing limit. Exclusive rights within that zone.
:17:31. > :17:41.A massively successful fishing industry. That would go to. Why
:17:41. > :17:43.
:17:43. > :17:52.would anyone in your country want to be in the EU? We are part of the
:17:52. > :17:59.inner markets. We look at a lot of rules and regulations. We are
:17:59. > :18:05.integrated in many ways. We have to make a decision on whether to go or
:18:05. > :18:12.become a full member. The European Union is our biggest market. 70% of
:18:12. > :18:18.our exports go to Europe. We are a European nation. How we build up
:18:18. > :18:22.our contact with Europe is an important issue that we need to
:18:22. > :18:25.work through. You signed up to a government which officially wanted
:18:25. > :18:33.to join the European Union, not because he believed in it but
:18:33. > :18:39.because he wanted a senior person Cabinet. It was pure politics. You
:18:39. > :18:46.do not believe in this at all. decided to put it to Parliament,
:18:46. > :18:51.whether there was a majority in parliament to apply. We were fully
:18:51. > :18:55.committed to that process. At the end of the day it is up to the
:18:55. > :18:59.Icelandic people to decide. That is the democratic way to settle their
:18:59. > :19:05.question like that. Maybe I am misreading them. The poll suggests
:19:05. > :19:13.that at least 60% of Icelanders have said that they do not want to
:19:13. > :19:19.be in the European Union. You are right. There is strong opposition.
:19:19. > :19:24.This is a controversial case. There was always bound to be so. No doubt
:19:24. > :19:33.some of the recent events in Europe and in how contact with Europe have
:19:33. > :19:42.not helped support membership. I am referring to the problems that the
:19:42. > :19:49.euro is facing. I think that at the end of the day it, how successful
:19:49. > :19:53.the euro is it will solve this problem. Why is the mood in your
:19:53. > :20:02.country so sour, but in many ways you can argue that you dodge table
:20:02. > :20:11.at? -- dodged a table at. Your economy is recovering. Yet the
:20:11. > :20:17.public mood is angry and the sour. Why? That is a good question. This
:20:17. > :20:22.was a major shock to Iceland. We thought we were very rich. The
:20:22. > :20:31.standard of living was going up. We had a big party in Iceland after
:20:31. > :20:35.the millennium. It was a big shock. We woke up one morning and if our
:20:35. > :20:45.Prime Minister was on TV telling us that the country might become
:20:45. > :20:45.
:20:45. > :20:51.bankrupt. It was a big change. A lot of people were hurt. A lot of
:20:51. > :20:55.innocent people that carried no responsibility, living in the house
:20:55. > :21:00.and trying to deal with their finances were taking a hit.
:21:00. > :21:04.keeps saying these people bear no responsibility. Is that a
:21:04. > :21:09.indication that you believe it is right to push ahead with the legal
:21:09. > :21:13.proceedings against the former Prime Minister, who we had in the
:21:13. > :21:17.show a year or two ago and hundreds of other people, bankers,
:21:17. > :21:27.politicians, civil servants who appear to be under investigation.
:21:27. > :21:31.Do you personally want to see individuals put behind bars? That
:21:31. > :21:36.would be according to our laws and constitution. That is the only way
:21:36. > :21:41.to sort things like that out. We have to stick to the law. I'm just
:21:41. > :21:46.asking a more philosophical point. Do believe it is important to get
:21:46. > :21:54.rid of this sour mood, this anger in Reykjavik and Iceland, to see
:21:54. > :21:58.people punished and may be imprisoned? It needs to be done. I
:21:58. > :22:04.do not Lockett as a sacrifice a punishment to make people at ease
:22:04. > :22:08.with things. We need to as a society work through this by
:22:09. > :22:17.getting his things behind us and are focusing on the future. It will
:22:17. > :22:21.take time. It was a big psychological, political shock. As
:22:21. > :22:28.I analyse the situation today, our economy is definitely improving and
:22:28. > :22:35.recovering. Economic way, things a looking better and better. The
:22:35. > :22:42.problem that stands today is perhaps 25% economic all but 75%
:22:42. > :22:47.psychological. I will quote you the words of a political scientist who
:22:47. > :22:52.has been looking at the truth committee you have had. He says
:22:52. > :22:57.that what we have learned is that in Iceland we have had a mix of be,
:22:57. > :23:00.greed, incompetence -- incompetence, nationalism, youthful risk-taking
:23:00. > :23:08.and a kind of collective superiority complex. The truth is
:23:08. > :23:18.that we in Iceland lost sight of their roots and our values. There
:23:18. > :23:24.is a lot of truth in that. We as a people have to honestly face that.
:23:24. > :23:30.We went off track. Completely of track in many ways. It is not just
:23:30. > :23:38.a question of responsibility. We as a people also need to look this in
:23:38. > :23:45.the eye. That does not mean that the ordinary people are responsible.
:23:45. > :23:48.But many joined in. Even the media, and the bigger parliamentary
:23:48. > :23:58.investigation expenses for a while. How was this dealt with? We have to
:23:58. > :23:58.
:23:58. > :24:03.follow the law. We have to shoulder that responsibility. Not just
:24:03. > :24:11.because we want to punish them but because that is how power law and
:24:11. > :24:20.constitution works. We need to join a forces. We have not made a lot of