The Icelandic rebels are at it again: taxing banks to write down home mortgages

Just over four years ago, the tiny island republic of Iceland experienced the worst economic collapse of any European country. Growth sank, house prices plunged, unemployment soared and all the banks had to be nationalised. But unlike here, Iceland let its troubled banks simply die and since 2011, the country has seen growth average at over 2% - comfortably more than the UK. The macro economic good news however masks the pain being felt by many ordinary Icelanders.
Joe Lynam was there to ask what can we learn from the Icelandic experience.

Democracy on ice: a post-mortem of the Icelandic constitution

Whence the fierce opposition to constitutional reform? The chief opponents were the usual suspects: the political allies of special interest groups such as the fishing vessel owners whom the politicians had turned into a state within the state through gratis, or practically gratis, allocation of valuable fishing licenses. The opposition also came from politicians who would not stand much chance of being reelected to parliament under the principle of ‘one person, one vote' (as the current system requires much more votes to be elected as an MP in Reykjavik than in one of the more rural areas). Indeed, constitutionally protected national ownership of natural resources and electoral reform to ensure ’one person, one vote’ were the two principal hallmarks of the bill.
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Parliament does not vote in secret, however, and this was key. In an attempt to ensure that the constitutional bill would have to be brought to a vote, Margrét Tryggvadóttir MP presented the bill put forward by the parliamentary committee in charge (of which she was a member) as an amendment to another related last-minute bill. But the president of the parliament put the last-minute bill to a vote without first presenting the amendment, thereby failing to bring the constitutional bill to a vote, in violation of parliamentary procedure. This happened at 2 A.M. on the morning of the last session of parliament before recess. The enemies of constitutional reform carried the day and democracy was put on ice. The government blamed the misbehaving opposition for the debacle, while the outgoing prime minister who had launched the process in 2009 said this was the saddest day of her 35 years in parliament.

The April 2013 election produced a coalition government of the Independence Party and the Progressives, the two parties that privatized the banks à la Russe and set the stage for the crash of 2008. The parties represented in parliament hardly mentioned the constitution in the campaign; they wanted to avoid the subject. The Progressives won the election by promising instant household debt relief. In office, the first thing they did – surprise, surprise – was arrange instant tax relief for the vessel owners. It is clear that the two parties have no intention of reviving the constitutional bill. To them, it does not matter that 67 percent of the electorate expressed support for the bill and its key provisions. Further, they have decided to put Iceland’s 2009 application for EU membership on ice. Expect more ice to come.

As always, however, there will be a new parliament after this one. One day, most probably, the constitutional bill approved by the people of Iceland in the 2012 referendum or a similar one will become the law of the land. Stay tuned.

http://www.opendemocracy.net/can-europe-make-it/thorvaldur-gylfason/democracy-on-ice-post-mortem-of-icelandic-constitution