A FEW days before the terrorist attacks of September 11, 2001, the then-prime minister of Iceland was in lyrical mood as he addressed a meeting of his country’s diplomatic corps.
David Oddsson was renowned for his literary interests. He wrote two plays in the 1970s, translated an Estonian history textbook and now he was quoting WH Auden, the British poet, who had written of Iceland half a century earlier: “Fortunate island/ Where all men are equal/ But not vulgar — not yet.”
Oddsson said his government’s aim was to “manage things so well” that future poets would return to Iceland to pay similarly handsome compliments. Instead, the 60-year-old former prime minister finds himself at the eye of the financial storm that last week swept away his country’s banks and provoked a decidedly vulgar outbreak of international rancour.
Oddsson stepped down as premier in 2004 and was rewarded a year later with a new job as chairman of the country’s central bank.
The appointment went largely unremarked at the time, but last week’s collapse of the Icelandic banking system — and the eruption of a nasty diplomatic spat with Britain — has caused many Icelanders to question the wisdom of handing effective control of a supposedly independent financial institution to a powerful, right-wing politician who enthusiastically espoused the free-market policies of Margaret Thatcher and Ronald Reagan.
Oddsson’s distaste for the euro and his rigid support of a high interest-rate policy aimed at taming inflation thrilled British savers and lured billions in inward investments.
Yet several analysts last week concluded that serious misjudgments by the Icelandic central bank had opened the door to meltdown and destroyed the national currency, the krona.
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