BOOKS 
Meltdown Iceland: How the Global Financial Crisis Bankrupted an Entire Country
By Roger Boyes
Bloomsbury £12.99, 256 pages
FT Bookshop price: £10.39
Iceland was the world financial system writ small. When the economy blew up last year, the insufficient vigilance given to the country by police, regulators, politicians and journalists was laid bare.
Iceland had one of the highest gross domestic products per capita in the world. The end of the miracle came when the global credit crunch hit a country whose banks had run amok and which lacked the clout to save its financial system.
The leverage of the country’s three big banks, the investment firms they supported and the companies they in turn bought was too great: a mirage of debt piled on debt, shares borrowed, cross-ownership and shell corporations registered in Luxembourg and the British Virgin Islands.
In their dealings with consumers, Icelandic banks were scarcely less reckless, touting mortgages denominated in low foreign currency interest rates, to be paid off with an over-valued Icelandic krona.
That is the concise story of “how the global financial crisis bankrupted an entire country”, but the book that purports to tell this tale takes its time to get there. Roger Boyes, a correspondent for The Times who spent some months in the country after the crisis, explains that Meltdown Iceland was written quickly. It is certainly difficult to follow as it lurches from aluminium smelting to the American Glass-Steagall act to the currency carry trade.
This is a shame because Boyes also gets close to the heart of the corporate skullduggery: the friends who act in concert in acquisitions; the boards that are misled; the profits conjured from thin air with commissions liberally sprinkled around.
The stand-out chapter, “Bubble”, shows the author at his best – sardonic but not too glib, identifying weaknesses in the financial system and cultural climate that helped cause the economic collapse.
Boyes sums up: “1. Icelandic bank with dubious credentials bids for established foreign bank using borrowed money. 2. Targeted bank eagerly takes the offered cash, claiming to be acting in the interest of shareholders. Registers doubts with FSA [the UK Financial Services Authority] or other regulatory body. 3. FSA contacts Icelandic regulator, who offers reassurance. 4. Icelandic regulator attends school reunion with Icelandic banker.”
Boyes, whose first foreign assignment was reporting on the Cod Wars of the 1970s, is particularly good on the frequently strained relationship between Iceland and Britain. They have a history of claiming both victory and victimhood – whether scrapping over fish or bank deposits, he says.
Iceland’s former prime minister, who was the central bank governor at the time of the crisis, now edits the country’s leading newspaper. Whan indicator of a strange democracy amid continued economic upheaval.
Tom Braithwaite is the FT’s US business and politics correspondent and reported on the Icelandic crisis
