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New Years´s Address 2008

Good evening, my fellow Icelanders, and Season’s Greetings!

This evening the year 2008 will draw to a close. We see it depart with mixed emotions. In economic terms, this could be called a year of disaster. The nation’s financial system suffered a major setback and the living standards of the population at large have deteriorated. The events occurring in the financial sector during the final quarter of the year overshadow everything else which occurred in 2008. Nonetheless, the first half of the year was, in many respects, a favourable one, with the fine weather we enjoyed this past summer leaving most of us with new treasures in our chest of memories, including in fact the silver medal won by our handball team at the Olympics in China. We must not allow the current difficulties, temporary as they are, to obscure our entire existence; let us enjoy this evening and look forward to the future with optimism.

Although the year waiting in the wings will clearly be difficult for many individuals and families, no less than for business and for the Treasury, what is most important is how we deal with these difficulties. We cannot let them overwhelm us, rather we must encounter the New Year as if it were a new challenge to make things better – hope full of optimism is Icelandic, as Margrét Jónsdóttir worded it in her poem Your Country Iceland. This optimism and this hope is raised on a solid foundation, in the view of those people, at home and abroad, who know us best. A comparison with other nations, taking all aspects into consideration, shows that it is neither fantasy nor illusion but rather absolutely certain that the sun will shine once more in Icelandic economic and business life before long. As we all know, our resources, both in and around the country, are very substantial. Most important is that resource which all Icelanders have inherited: their fighting spirit, the will to conquer difficulties which they may encounter.

During the first half of the past year, storm clouds collected over global financial markets and, after having wiped out numerous leading banking and financial companies on both sides of the Atlantic, the tempest struck Iceland in the autumn months. Unfortunately, the country’s financial infrastructure did not prove strong enough to withstand the onslaught. In my address to the nation on October 6th I explained what had happened. Since that time, all Icelanders have been working with a single will to bring the situation under control. I want to express my gratitude to the many people who worked night and day in government offices, corporate board rooms, organisations and associations, schools and households so that our society could continue to operate on a normal basis under the abnormal conditions which developed. The Icelandic nation once again showed its mettle.

Since the disaster struck Iceland, the situation in most parts of the world has worsened markedly, creating a very real danger that the entire global community could be sliding downward into a recession of unknown proportion. In such circumstances, it is some consolation to know we have already taken actions this autumn directed at resolving our problems, in co-operation with the International Monetary Fund and several friendly countries. On the other hand, it is evident that the leaders of the world’s largest countries and multinational organisations will have to get together to forge the tools necessary to prevent such man-made catastrophes in the future. We were convinced that steadily increasing knowledge of economic mechanisms would enable the world to avoid such disasters. However, the difficulty also appears to be that great advances have been made as well in techniques used to benefit from creating chaos, play on the system for individual advantage and bet against the public interest. For this reason it is urgent that the rules on financial market behaviour be tightened and all violations be dealt with firmly.

Here in Iceland we have to learn the appropriate lessons from what has happened, preserve what was done well and correct what went wrong. Three points are foremost in my mind: Firstly, we have to keep everything in proportion. We have to ensure that no single sector of the economy expands without restraint and results in disequilibrium, as was the case with the banking system. Secondly, our economy needs to be based on creating real value. Here I am not only referring to fisheries, aluminium production and traditional agriculture, but also many other types of production and services we can offer, such as tourism, and knowledge industries of various sorts based on rational utilisation of the nation’s natural resources, knowledge and human capital. In the third place, we need to adopt and practice new attitudes in business and industry. Recklessness and excesses should be a thing of the past. Business leaders need to acknowledge their responsibility to the community to a greater extent. Freedom brings responsibility. Many actions by the banks and their management did not reflect the responsibility which can legitimately be demanded from them. The arrogant attitude towards wealth shown by those who led the way, both in the banks and industry in general, is an affront to the great number of people who contributed to creating the wealth which was thus wasted and destroyed.

The Icelandic nation, both families now living and generations to come, are fully entitled to have all the events leading up to the collapse of the banks investigated to the last detail. Solidarity and social consensus is founded on trust and the comprehensive investigation which Althingi has now launched is intended to create the premises for reconstructing that social cohesion.

I want to take this opportunity to state clearly and directly to all of you, fellow Icelanders, that as Prime Minister I am responsible for governing this country and accept that responsibility, in fair weather or foul. Not a day passes when I do not ask myself whether the government could have prevented those events which took place here this autumn. While we have doubtless made our mistakes since disaster struck, it is nonetheless clear in my mind that it was not within the power of the Icelandic authorities to prevent the collapse of the Icelandic banks after the global crisis hit in full force. All government actions in recent months have been aimed at limiting the damage which the nation will inevitably suffer due to the banks’ collapse. This struggle has been waged day and night and is far from over.

Icelanders possess plenty of courage, strength, daring and imagination, but to judge from recent events such positive qualities can well lead to negative results if not tempered by humility. When times are good, rapid progress and changes can cloud our vision. If I have erred as a result, I regret this.

Fellow Icelanders.
To some degree, our nation stands at a crossroads. The society we have created in recent decades, primarily following the example of our neighbours in the Nordic countries, Europe and North America, has grown and developed well, improving our living standards enormously. There has been widespread social consensus that we were following the right path. But the setbacks that occurred this autumn must make us pause, ask some difficult questions and re-evaluate our options. On the one hand, we can continue to pursue freedom of trade and close international economic co-operation, as we have done, or we can withdraw, isolate ourselves in this respect and return to previous trade practices. We have experience of both. Isolation and a lack of economic diversity leads to long-term stagnation, hopelessness and eventual resignation. This is not the route we should take. Instead we should continue to follow our neighbours, work with them and build a society which offers everyone an opportunity to take the initiative and try their strength. Now we know the pitfalls which must be avoided. This is not to say that the route will be without difficulties, life is not like that. We have to learn from our harsh experience and put it to good advantage, rather than let it paralyse us with fear and despair. We have to create a structure for the country’s financial system which is comprehensible to the public at large, avoiding complicated schemes and deceptions which instil mistrust and suspicion in the minds of the public. By ensuring transparency in business we can focus more clearly on the traditional positive values we were taught as youngsters and have grown up with: diligence, honesty, foresight and resourcefulness, coupled with humility and gratitude for what we have been given.

Fellow Icelanders.
Our relations with other countries have been much in the forefront of discussion in recent years. This is nothing new. For some reason Icelanders are more suspicious of foreign power than many other nations. The cause of this no doubt can be found in our own history and how we have interpreted it. But it is important for us to have good allies and to have our interests taken into consideration when decisions are made in our part of the world.

Currently this debate concerns whether Iceland should go the whole nine yards and apply for EU membership. The international environment has changed substantially since the last time this question was examined, in 1990 and ensuing years. Our conclusion was to take the step of joining the European Economic Area. In my opinion this has served us well. But the reason for not going any farther at that time was primarily that we Icelanders wished to securely protect our natural resources, and to control them fully ourselves.

It is, naturally, time we reconsidered this question. Evaluating how Iceland’s interests are best served is always the task of political debate. We should not approach this with foregone conclusions, nor with the delusion that it offers some magic solution. A glance at the countries surrounding us suffices to show that they, too, have plenty of problems to contend with, both socially and economically. It is very important to maintain the consensus which previously prevailed concerning the protection of the country’s natural resources; in my opinion, statements made by the leaders of all our political parties indicate this is possible. There are many aspects to this question, including the interests of individual sectors and different areas of the country, currency issues, questions of sovereignty, control of resources, etc. And then there are naturally those who dispute the desirability of those ideals upon which the European Union is founded.

This is a long-term issue where the nation itself will have to decide which course to pursue. But it is the responsibility of politicians to support informed discussion of possible accession to the EU, ensuring that the options are clear and correctly presented.
Fellow Icelanders.

Bishop Sigurbjörn Einarsson died last summer. Few Icelanders have enjoyed such widespread respect and popularity. A volume of his hymns and poetry entitled Not Beyond the Stars was published just before Christmas. Among the many well-worded and genial lines are the following:

Ó, vertu, Guð, í verki manns,
 í vilja, draumi, anda hans,
 í þrá og starfi þjóða,
 að sagan verði sigur þinn
 og signi jörðu himinninn
 sem gróðurreit hins góða.

O, Lord, may you direct our hand,
our wishes, dreams and spirit,
as we serve the nation’s end.
Our story then will honour you
and heaven bless this earth,
as a garden green and good.


It is my sincere wish this evening, fellow countrymen, that God may give us the strength and optimism to deal with those tasks which the New Year will bring. Both I myself and those working with me in the political arena are determined to do everything in our power to reinforce the framework supporting our daily lives, in order that we can create the premises for “a garden green and good”.

We have become accustomed to a good life in Iceland, with steady progress. Fortunately, the overall material setback resulting from the shocks we have suffered will be only equivalent to a few years’ progress. We will make up for this in the coming years. That is not merely my hope, but rather firm conviction.

Let us welcome the new year in this spirit.
Thank you, and Happy New Year. 

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