Reykjavik: Iceland Prime Minister Geir Haarde has some advice for his fellow citizens after the country's banking system imploded: Go fishing.
"We are too small a country to sustain such a big banking system," he said in an interview. "We have fantastic resources and an abundance of green energy and we will now utilise that and the other resources we have, the ocean and human capital."
Over the past decade, Iceland's banks backed a buying binge that saw local investors take stakes in retailers such as Saks Fifth Avenue, jeweller Mappin & Webb, and the parent of American Airlines, while the nation's banks snapped up financial services firms abroad. That foreign adventure came to an end this week with the government seizure of Iceland's top three banks, including Kaupthing Bank hf, the nation's biggest lender.
Now residents are betting that the Atlantic island's natural resources, primarily fish and geothermal energy, will help the country survive.
"We can live off the land as there are not so many of us, and we have heating, clean water and fish," said Reykjavik resident Kristinn Johansson, 50, outside a branch of the now-nationalised Kaupthing. "We will be fine. We can eat what we can fish."
Haarde was Iceland's finance minister from 1998 to 2005 and assumed his current position two years ago. He advocated the sale of state enterprises and bank investments abroad to diversify the economy.
As Iceland's global ambitions grew, the country's top three lenders amassed assets valued last year at 12 times the country's $19 billion gross domestic product. The island's population of 320,000 puts it on a par with Cincinnati.
Iceland's export of marine products made up about a third of total exports in August, according to Statistics Iceland in Reykjavik. Most trawlers hunt for cod and haddock.
Catch volumes have been in decline since a peak in 2000, when Iceland's haul nudged two million tonnes. The contribution from fisheries to GDP dropped to about seven per cent last year, from 12 per cent a decade earlier.
Iceland has fought to protect its fishing territory. The country's navy clashed with the UK during the 1950s and 1970s as Britain sent frigates to guard trawlers it said were being harassed by Icelandic gunboats. The UK remains its largest customer, accounting for more than $400 million of fish exports last year.
Tensions
Now relations with Britain are frayed again, this time over the fallout from the banking crisis.
Iceland's government said last week that it wouldn't cover losses for British customers after the collapse of Landsbanki Islands hf, whose UK-based Icesave unit had 300,000 accountholders.
Britain's Conservative Party said local governments may have had as much as £1 billion ($1.73 billion, Dh6.5 billion) deposited with Icelandic banks.
"We used to stick to what we do up here and then we went abroad, into new economics, and that went wrong," said Vilhjalmur Bjarnason, the director of the Association of Small Shareholders in Iceland.
