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This credit crunch victim should be helped, not vilified - read Diana's piece in today's Yorkshire Post

November 11, 2008 12:39 PM
Originally published by Diana Wallis

Iceland flagThis credit crunch victim should be helped, not vilified

ONE country most devastated by the global credit crunch is Iceland - way up there to the north west of continental Europe; a chilly, windswept island feeling more isolated now than even its geographical position might indicate.

It is a country, however, which has strong historical links with our own region. Indeed, despite the memories of the Cod Wars, there is a twinning link between the Icelandic capital Reykjavik and Hull, a linkage celebrated recently by the unveiling of a statue in the city.

Despite the current good relationship, some have suggested that there is perhaps a sense of schadenfreude, an overdue sense of revenge for the ravages of the Cod Wars, in Hull and Grimsby when they now see Iceland with its banks in tatters, its currency devalued and its Government labelled as "terrorists" by Gordon Brown so that he could freeze Icelandic assets.

However, for those of us who have been following Iceland

over the years this economic collapse was not wholly surprising. What was more surprising was that a country with a population about the same size as Hull and with an economy based largely on fish and tourism could really be generating enough money to buy up many of our high street stores and football teams.

Something has not added up for a long while and this, combined with the evident volatility and vulnerability of the Icelandic krona, should have indicated the over leveraged and high risk nature of Icelandic investments.

Doubtless there will be many recriminations to follow once the dust has settled, but what we should also factor in is the unique impact on the economy in our own region here in Yorkshire and the Humber and how that is perhaps best dealt with.

In common with elsewhere in the country, some of our local authorities had money tied up in Icelandic banks, but additionally there is a particular impact on local financial operators like the Barnsley Building Society, now taken over by the Yorkshire Building Society. Then there are industrial links through the ports in Hull and Grimsby by way of fish processing and the regular flight of Icelandic air cargo into Humberside airport. We are hearing threats of closures and losses of hundreds of jobs here in our region connected to Iceland's woes.

There are many Icelanders living in and around the Humber; their work and investment linked to companies operating here.

They have been put in an impossible situation, not least because of Mr Brown's obscene decision to use anti-terrorist legislation against Icelandic assets, a move which undoubtedly hastened and worsened the collapse which followed. It is a move which may, with hindsight, appear as nothing less than short sighted protectionism.

To equate the government of a western democracy with al-Qaida should be a cause for questioning what we have enabled by giving our government such powers. In practical terms, this has meant Icelandic expats and firms in Yorkshire cannot remit monies home to the businesses there that supply them.

They cannot, therefore, pay to bring in the fish stocks which our own businesses and jobs here in the region depend upon.

For our region, Mr Brown's much trumpeted quick action could look somewhat self-defeating. The last thing we need are further business failures of our own creation.

The reaction of other European countries has been more measured. It seemed many had Icelandic investments more correctly categorised as higher risk. Maybe this will turn out to be yet another example of our "light touch" regulatory approach or just plain greed.

The fact is that Iceland is now looking for a helping hand and not to be pushed further down. Indeed, most European countries, especially her Nordic neighbours, would like to show such solidarity.

There is a feeling that if Iceland could be got into the eurozone through a quick application to join the EU, which now more than two-thirds of the population want, this might be the best option. It would certainly help strengthen the trading ties in our region.

Yet it appears at the recent EU summit, Mr Brown vetoed a more friendly gesture to Iceland. He likes now to talk about the world acting together in this crisis.

Arguably, Icelandic financial services regulation was no different to our own in the UK, but as yet nobody has labelled us as terrorists for the failure to get our banks under control. Much better surely that we realise we are all in this together and that the economies of our region and country are now so entwined that we need solidarity and not protectionism to win through this crisis.