The Global Financial Crisis –

Britain, the EU and Russia in a Financial Power Play in Iceland


The old saying that “he who pays the piper calls the tune” seems to be coming home to the small country of Iceland, a covenant people and nation linked to the descendants of the tribe of Benjamin. In this context it has always appeared significant that Benjamin, known as the ‘lightbearer’ of the Israel of God, should have been found dwelling at the end of the earth on an island known for its volcanic light and fire. 


The global financial crisis, stemming from the United States sub-prime mortgage crisis, has resulted in dramatic effects for Iceland which has found itself over-extended by its overseas investments, many of which are with United Kingdom companies. The Prime Minister of Iceland, Geir Haarde, confirmed on October 7, 2008, that the country had asked for a US$5.43 billion loan from its “new friend” Russia, because it initially found no aid coming from its Western allies. Iceland, the NATO member state and staunch US ally against the Soviet Union during the Cold War, has been devastated by the global credit crunch that destroyed its banking sector and currency.


The banks in Iceland have either been nationalized or propped up by the state, but the krona (Iceland’s currency) has fallen dramatically in value. The Russian loan may well stave off a speculative run on the krona and save the county from complete bankruptcy.


Mr Haarde told reporters that Iceland had first approached other countries before calling Moscow, but they had turned him down, although he was diplomatic enough in refusing to identify which ones. It is understood however, that Reykjavik approached the EU first, followed by Nordic countries and finally the US Federal Reserve itself. “In a situation like that, one has to look for new friends,” said Mr Haarde. Since then Norway, which is not in the EU, has offered financial help to Iceland. Britain also is moving towards offering some help.


“Come out of her, my people”

Meanwhile, the UK government on Sunday October 12 (‘better the day, better the deed’!) seized £4 billion of Icelandic assets, employing anti-terror legislation to do so – a move that understandably shocked the island’s government. Mr Haarde said it was “not very pleasant” to learn that anti-terror laws had been used against an ally. UK Prime Minister Gordon Brown’s description of Iceland’s failure to guarantee British deposits as “effectively illegal,” was ruinous of Iceland’s trust in the British government and the remark seriously undermined the name of Iceland among the nations. Mr Haarde has accused the UK of “bullying a small neighbour.”      


In Britain many individuals, city councils, London Transport and even the London Metropolitan Police together with a range of charities have been caught up in the Icelandic financial meltdown. UK treasury secretary Yvette Cooper said the government would retain the assets until British savings were returned. At the time of writing (October 15), it looks as if one-third of their money could be paid out of the money held by Icelandic banks in the UK.   


Overall the amount of sterling frozen in Icelandic banks is estimated at £3 billion – so as things stand the UK is £1 billion ahead by its seizure of Iceland’s assets! Those people, whose money has been in off-shore accounts in the Channel Islands and the Isle of Man, may not be covered by the commitment of the British government to underwrite their deposits. 


It is a very difficult time for the family of the covenant nations in this unprecedented financial crisis. Britain and Iceland being in dispute, with possible legal actions being talked about on both sides, need time to work out an equitable solution. The fall of economic Babylon was always going to be a devastating experience for the Western nations, but prophetically we have seen it coming for at least 80 years. The Apocalyptic vision in Revelation 18:4 for the Israel nations to “Come out of her, my people,” is not a suggestion, it is a command, this in order that we do not partake of the judgments that bring down the entire structure.


Will Iceland Join the Sinking Ship?

Also on October 12, Iceland’s eurosceptic fisheries minister, Einar Gudfinnsson, a long-standing opponent of membership in the European Union for the north Atlantic island, told Icelandic radio: “It’s no secret, I’ve been against membership. However, the current turmoil means we have to look at every option.”


Echoing Mr Gudfinnsson’s comments, Social Democratic foreign minister Ingibjorg Solrun Gisladottir wrote in Icelandic daily Morgunbladid that in the long term the country must embrace the European Union and replace the krona with the euro.


“In the short term, our defence is co-operation with the International Monetary Fund and in the long term EU membership, adoption of the euro and backup from the European Central Bank,” she wrote, as reported by Reuters.


The fact is, however, the financial crisis is hitting the 15-nation euro zone of the European single currency as much as the US. Fresh capital is being raised in Germany and France, but the Europeans have generally been running from one fire to another with micro-solutions. To the surprise of many, Italy has so far emerged from this crisis in better shape than Germany. It is a moment for them to savour after years of suffering lectures from Berlin.


Looking to the future, there is a very serious prospect for Iceland to think deeply about. There is a real possibility that the unity of the euro zone and even the single currency itself could collapse. The European Central Bank is not proven in a crisis, having a possible fatal weakness, in that the euro zone countries cannot call on the ECB for support like Britain and the US call on their central bank and financial reserve.


When feelings have calmed down and agreement has been reached on the huge sums of monies lost, rather than looking towards what may well become the sinking ship of economic Babylon in the EU, Iceland could be well advised to re-finance her banks in cooperation with Britain by joining herself to sterling. Iceland and indeed Britain herself could become subject to an EU strategy in the months ahead to frighten both countries into joining the euro. They should resist these scare tactics with every bit of determination that they can muster, as it could become a case likened to the boarding of the Titanic in April 1912.


The potential is that Iceland, like the tribe of Benjamin, could live up to its ancestral role of becoming the ‘lightbearer’ of the covenant nations. They would then show the way towards a complete reforming of the monetary system. This, that the Free World become truly free for the first time since the US Federal Reserve was set up in 1913 – and even since the institution of Britain’s national debt in 1694, with the founding of the Bank of England.


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