Icelandic Prime Minister Geir Haarde addressed the nation as the country faced
its worst economic crisis in modern times and introduced emergency
legislation.
Following are excerpts from a text of the speech released by the Icelandic
government.
Fellow Icelanders...
The entire world is experiencing a major economic crisis, which can be likened
in its effects on the world’s banking systems, to an economic natural
disaster...
The Icelandic banks have not escaped this banking crisis any more than other
international banks and their position is now very serious. In recent years
the growth and profitability of the Icelandic banks has been like something
akin to a fairytale. Major opportunities arose when the access to capital on foreign
money markets reached its peak, and the banks together with other Icelandic
companies, exploited these opportunities to launch into new markets.
Over this period the Icelandic banks have grown hugely and their liabilities
are now equivalent to many times Iceland’s GNP. Under all normal
circumstances larger banks would be more likely to survive temporary
difficulties, but the disaster which is now engulfing the world is of a
different nature, and the size of the banks in comparison with the Icelandic
economy is today their main weakness.
When the international economic crisis began just over a year ago with the
collapse of the real estate market in the U.S. and chain reactions due to
the so-called sub-prime loans, the position of Icelandic banks was
considered to be strong, as they had not taken any significant part in such
business. But the effects of this chain of events, have turned out to be
more serious and wide ranging than anyone had expected.
In recent weeks the world’s financial system has been subject to
devastating shocks... The effects have been that large international banks
have stopped financing other banks and complete lack of confidence has
developed in business between banks. This has caused the position of
Icelandic banks to deteriorate very rapidly in the last few days...
The Government of Iceland, the Central Bank and the Financial Supervisory
Authority have over the past days and weeks worked ceaselessly to find a
solution to the enormous difficulties which threaten Icelandic banks, in
good cooperation with the banks. Various parties have been involved in this
work, for example the pension funds and representatives of the labour market.
The Government has, for its part, aimed for the sale by Icelandic banks of
foreign assets and a reduced presence abroad, so that the Icelandic state,
so small in comparison with the Icelandic banks, would have the capacity to
support them. We should bear in mind in this connection that the huge
measures introduced by the U.S. authorities to rescue their banking system
represent just under 5 percent of GNP. The total economic weight of the
Icelandic banks, however, is many times the GNP of Iceland...
There is a very real danger, fellow citizens, that the Icelandic economy, in
the worst case, could be sucked with the banks into the whirlpool and the
result could be national bankruptcy....
The position has today altered completely and for the worse. Major credit
lines to the banks have been closed and it was decided this morning to
suspend trading with the banks and with the savings funds in the Icelandic
Stock Exchange.
We now need responsible and measured reactions...
By making these changes in legislation we will adapt the banking system to
Icelandic circumstances and rebuild the trust of foreign operators in
Icelandic banking and financial operations. If the bill is passed today it
can be assumed that the measures will come immediately into force.
I would like to diffuse all doubt that deposits by Icelanders and private
pensions savings in all Icelandic banks are secure and the exchequer will
ensure that such deposits are reimbursed to savers in full....The
authorities will also ensure that the country’s businesses have access to
capital and banking services to the maximum extent possible...
If there was ever a time when the Icelandic nation needed to stand together
and show fortitude in the face of adversity, then this is the moment. I urge
you all to guard that which is most important in the life of everyone of us,
protect those values which will survive the storm now beginning....
Despite this major setback the future of the nation is both sure and bright.
What is most important is that the foundations of our society and the
economy are solid, even though the superstructure has given way in the face
of the present disaster. We have natural resources, both on sea and land,
which will ensure us a good living whatever happens. Our level of education
and the human resources which we have here are no less enviable in the eyes
of other nations than our natural resources.
By the same token, we will have the opportunity to rebuild the financial
system. We have learnt from those mistakes which were made during that
period of massive growth and that experience will prove to be valuable when
put to the test. With a common effort and with that optimism which
characterises the Icelandic people, we will emerge from these difficulties
and make a new and energetic come-back...
The task of the authorities over the coming days is clear: to make sure that
chaos does not ensue if the Icelandic banks become to some extent
non-operational. For this the authorities have many options and they will be
used. Both in politics and elsewhere it will be important to sheathe our
swords. It is very important that we display both calm and consideration during
the difficult days ahead...
