Iceland, a country with a $13 billion economy, had six dollar billionaires before the financial crisis struck in 2008. Now it has none.
Five of the men -- including former West Ham soccer team owner Bjorgolfur Gudmundsson and Baugur Group hf founder Jon Asgeir Johannesson -- have lost all, or most of, their fortunes after building empires on loans from banks that used the island’s investment bubble to stretch their assets to 10 times the size of gross domestic product.
At least three of Iceland’s ex-billionaires are, or have been, the subject of financial misconduct probes. Johannesson, who once flew around in a pin-striped private jet and owned luxury apartments in New York and London, received a suspended one-year jail sentence in February for violations including accounting fraud. He and Gudmundsson, who filed for bankruptcy in 2009, personified the boom-to-bust cycle that dragged Iceland away from fishing and tourism and turned it into a center for high finance.
“Greed can’t again lead the way,” said Prime Minister Johanna Sigurdardottir, 70, whose Social Democrat-led government took over from the coalition that led Iceland into the crisis just over four years ago. “We’ve taken that route before with terrible consequences for this nation and its people.”
Debt Bubble
After gaining fame for its debt bubble and the havoc that ensued when it burst, Iceland now is purging itself of the values that brought it to the brink of ruin. The only country to take a former prime minister to court for failing to prevent the crisis has since forced banks to forgive foreign-currency mortgage debt. And in a move to prevent speculation, the Interior Ministry this year proposed limiting land ownership by offshore investors after repeatedly rejecting approaches by Chinese billionaire Huang Nubo.
Iceland’s collapse -- which sent average disposable incomes plunging 20 percent between 2008 and 2010 after the banks defaulted on $85 billion -- even prompted the pro-deregulation Independence Party to pledge its commitment to welfare over investor rights.
Sigurdardottir, whose coalition faces elections in April, says the result is greater economic stability. Her party’s goal is to continue “shielding those groups in society that need it most,” she said in an interview.
IMF Program
The island, which exited an International Monetary Fund-led bailout in August 2011, now is growing faster than most of Europe. Gross domestic product will expand 2.3 percent this year, while the 17-nation euro area will contract 0.2 percent, the Washington-based fund estimates.