JURIST - Paper Chase: Iceland ex-PM goes on trial over 2008 financial crisis

[JURIST] Former prime minister of Iceland Geir Haarde [official profile, in Icelandic] went on trial Monday on charges of negligence relating to the 2008 financial crisis [JURIST news archive]. The charges stem from the collapse of the country's three major banks in 2008 while Haarde was leader of the country's ruling Independence Party. The trial originally began in September [JURIST report] with Haarde's lawyers moving to dismiss all of the charges against him, a request which was denied. Haarde pleaded not guilty [JURIST report] in June, vowing to fight the charges and claiming they were the result of politics, a sentiment he reaffirmed [BBC report] on Monday. The trial got underway after the Iceland Parliament voted last week to dismiss a request [IceNews report] by the current leader of the Independence Party to end the trial. Public sentiment in the country is split as to the effect the trial will have. Some believe it is necessary to understand the problems that went into the conflict, while others see Haarde as a failed politician who is being sacrificed by the new government.

In September 2010, the Icelandic Parliament [official website, in Icelandic] referred charges to the Landsdomur, a special court to try cabinet ministers, after the Special Investigation Committee (SIC) [official website] released a "Truth Report" [report, PDF] claiming that seven Icelandic government officials acted with gross negligence in their management of the country's financial system prior to a 2008 bank collapse. The SIC determined that Haarde and former central bank head David Oddsson [official profile, in Icelandic] knew that banks were assuming overseas debt but took no action to prevent or mitigate the effects of the accumulation. The SIC also found that former minister of finance Arni Mathiessen, then-banking minister Bjorgvin Sigurdsson, former Financial Services Authority [official website] director Jonas Jonsson and central bank officials Eirikur Gundason and Ingimundur Fridriksson failed to take appropriate action when presented with information about the poor state of the country's financial sector. Iceland was hit hard [BBC backgrounder] by the financial crisis that emanated from securities related to the US mortgage market. When Kaupthing, Landsbanki and Glitnir [corporate websites] were taken over by the Icelandic government in 2008, they were holding debt equal to more than 900 percent [AFP report] of Iceland's gross domestic product, causing the country's economy to collapse and the government to rely on loans [IMF materials] from the International Monetary Fund (IMF) [official website] to meet its obligations.