Business

Former Iceland PM Geir Haarde goes on trial

  • 5 September 2011
  • From the section Business

Former Icelandic Prime Minister Geir Haarde has appeared at a special court on charges of "failures of ministerial responsibility" in his handling of the 2008 financial crisis.

The country's three main banks collapsed amid economic turmoil.

The failure of Icesave, which hit thousands of savers in the UK and Netherlands, led to a dispute over compensation, which remains unresolved.

Mr Haarde has called the case a "farce" and says he wants it to be thrown out.

The two-hour hearing finished at midday, and a decision is expected within three weeks.

Mr Haarde, who pleaded not guilty, said as he left the courthouse: "My conscience is clear.

"And now I wait for the result of the court whether it comes in a few weeks or next year with a verdict."

The hearing was held before the Landsdomur court, a special body to try cabinet ministers, which has never before heard a case.

Public opinion is divided, with some people seeing the trial of Mr Haarde as scapegoating, and others arguing that public accountability is essential following the country's financial collapse.

'Right thing to do'

Iceland was plunged into a deep recession following the collapse of its three leading banks, including Icesave's parent company Landsbanki, in autumn 2008.

Mr Haarde, 60, led the Independence Party government at the time.

He says that the case against him is a political vendetta by the current coalition.

The charges carry a maximum penalty of two years in prison.

His lawyers argue they are too vague to meet legal standards and have not been properly investigated.

"When it became clear we were heading towards catastrophe... the record shows very little was done to avoid it," current Finance Minister Steingrimur Sigfusson told the AFP news agency.

But Mr Haarde argues that his government avoided the mistakes made by Greece and the Republic of Ireland, when he allowed failing banks to go under.

"We had to let them go. They went bankrupt. And it turns out now that this was the right thing to do," said Mr Haarde.

'Worst option'

Icelandic voters have twice rejected deals to repay the estimated 4bn euros (£3.6bn; $5.6bn) the UK and Dutch governments spent reimbursing citizens who lost money in the collapse of Icesave.

Prime Minister Johanna Sigurdardottir said that "the worst option had been chosen" after voters said no in a second referendum in April this year.

While the issue remains unresolved, administrators of Landsbanki said last week the estate of the bank could more than repay the UK and Dutch governments.

The administrators said this followed successful work to recover assets.

They added that payments could begin later this year, after final legal cases in Iceland are concluded.

When Icesave collapsed, the then UK Prime Minster Gordon Brown accused his Icelandic counterpart of "unacceptable" and "illegal" behaviour after Iceland said it could not give a guarantee to reimburse UK customers of the online bank.

In response, Mr Haarde accused the UK government of "bullying" and bringing down one of its other banks after the Treasury froze the assets of Icelandic institutions in the UK.

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