In 2008, Iceland was hit by financial crisis that led to jail terms as well as convictions for many top bank executives. However, according to the IMF, Iceland has succeeded in achieving economic recovery without affecting its welfare model that involves universal education and healthcare.
Moreover, the country may become the 1st country in Europe that experienced financial meltdown to “exceed its pre-crisis peak of economic output”—showing to the United States that bailing out banks was not actually the way to go.
In addition, the country decided to deal with the disaster in a unique way. It left the banks to fail that contributed to defaults totaling eighty-five billion dollars—offering ample justification for the conviction and prosecution of bank executives for a variety of fraud-related charges. On the other hand, the United States bailed out the banks as well as released the executives from blame by levying fines, which were paid by the corporations.
After the Supreme Court of Iceland upheld the convictions for 3 bankers as well as sentenced them to about 4-5 years each, special prosecutor Olafur Hauksson asked why they should have a part of their society that is without responsibility or that isn’t being policed.
He took the role of special prosecutor because the 1st announcement to fill the position did not draw any applicants. What’s more, the Parliament of Iceland helped the prosecution loosen secrecy laws to allow investigation.
Furthermore, 6 of the 7 convictions, which ended up in the Supreme Court of Iceland have been upheld, as well as 5 cases were scheduled for the top court as of February. That’s not all, an additional 14 cases were prosecuted, as well. On the contrary, after the bailout has grown more bitter, the Americans felt toward their greatest financial institutions. A paltry fine of 5.7 billion dollars was imposed by the court as the banks pled guilty in May for manipulating global interest rates and currency. The successful economic recovery and prosecutions of Iceland have remained the subject of envy for the United States.
But, the economic health of Iceland would be put to the test. Namely, the strict capital controls, which were applied about 6 years ago, would be loosened, letting foreign investors take their business elsewhere.
The finance minister announced a thirty-nine percent tax for everyone who does so in order to avoid a repeat crisis. Thorolfur Matthiasson, University of Iceland economics professor, noted that capital flight as well as a consequent fall in the value of the krona may be a danger to the economy.