September 12, 2010 6:18 pm

Iceland MPs call for trial of ex-ministers

Icelandic lawmakers are expected to decide within days whether to charge the ex-premier and three other former ministers with negligence for their role in the 2008 banking crisis after a parliamentary committee recommended criminal action.

A majority of the committee voted at the weekend to bring charges against Geir Haarde, the prime minister at the time of the banking crash, and the three others.

A move by parliament to accept the recommendation would mark the first concrete step towards holding politicians accountable for leading the island nation into financial turmoil.

However, the committee split down party lines, with members of the opposition Independence party, which Mr Haarde once led, resisting the push for charges.

Analysts said this raised doubts over the likelihood of parliament activating for the first time a special constitutional court created in 1905 to oversee such cases. They expected any vote to be close and divisive.

A parliament-commissioned “truth report” published earlier this year accused political leaders and regulators of “gross negligence” in their lax oversight of the banking sector, but left it for lawmakers to decide whether criminal action was appropriate.

A special cross-party committee was set up to assess the case against Mr Haarde as well as Arni Mathiesen, former finance minister, Ingibjorg Gisladottir, former foreign minister, and Bjorgvin Sigurdsson, former commerce minister.

Five of the nine-member committee backed charges against all four. Two lawmakers voted for charges against Mr Haarde and only two of the ex-ministers. The others rejected charges against all the men.

Punishment for criminal negligence could include fines or up to two years in prison.

In addition to potential charges against former political leaders, a criminal investigation is under way into the failed banks and their former bosses for alleged malpractice. Several former bankers have been questioned and some held in custody, but no charges have yet been brought.

Iceland’s banking sector assets grew to 10 times the size of gross domestic product in the boom years before the crisis, as the banks churned out easy credit at home and overseas. The forced nationalisation of the country’s three biggest banks – Landsbanki, Kaupthing and Glitnir – in October 2008 marked one of the most dramatic episodes in the global financial crisis.

Iceland and its 320,000 inhabitants are recovering only slowly from the deep recession and crippling debts left by the crisis. Rescue efforts have been complicated by still-unresolved dispute with the UK and the Netherlands over €3.9bn ($5bn) lost in the failed Icesave online bank.

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