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In the wake of the Lehman Brothers meltdown in 2008 on Wall Street, Iceland's financial system, currency and stock market collapsed. The giant British banks, as well as those of other countries, refused to throw a lifeline. For the British financiers, there was some self-interest in the decision, as they saw an opportunity to rid themselves of a competitor, especially in the field of internet banking where Iceland's overseas banks had much success in attracting British and Dutch depositors and investors, thus "infuriating" the British banks.

 

Only a chosen few could fit in the European lifeboat. And that didn't include Icelanders. Far from throwing a lifeline, the European Central Bank and the Bank of England were now "demanding liquidity from Iceland". The Icelandic government, facing the worst economic crisis in the country's modern history, was now supposed to guarantee the foreign deposits of its private banks. The message was clear: "Pay or die".

 

During the crisis, Iceland's Prime Minister Geir Haarde had wavered between extreme euphoria and abject pessimism. Pressed by reporters at one news conference, he declared that he needed "rest", and that he "hadn't really had a decent breakfast yet." This, along with his longstanding cozy relationship with the banks, dealt his credibility a fatal blow (1).

 

In the throes of his own domestic crisis, Britain's Prime Minister Gordon Brown escalated his demands that the Icelandic government, and by way of extension the Icelandic people, pay for the losses of British investors and depositors who had invested in the privately-owned Iceland banks, a sum of billions of dollars amounting to an estimated 40 to 60% of Iceland's entire GDP. But the Iceland government balked. It felt that, if help was to be extended, Icelandic depositors should have priority over foreign ones.

 

In an act of extraordinary retaliation, Brown invoked Britain's 2001 Anti-Terrorism Act, declaring Iceland a "terrorist state", putting it in the same league as the Taliban and Osama Bin Laden.   All because Iceland had hesitated in taking on the foreign debts of its private banks. Using this extraordinary legislation, the British government seized the assets of Landsbanki and portions of Kaupthing (which triggered the collapse of that Icelandic bank). 

 

Being declared a "terrorist state" had an immediate and devastating effect on Iceland, both at home and around the world. Invoking such a designation, imposes a kind of "civil death" on a country internationally. Iceland's international payment system collapsed and "funds sent to other countries were held up at some banks, or simply disappeared". Credit cards no longer worked anywhere and funds could not be transferred because of international banking "alerts" about Iceland being a “terrorist state”. People were stranded. Icelandic export companies were penalized and payments frozen. As MP and university professor Lilja Mosesdottir recollects, she could not even access her bank deposits while in Sweden. Later, her research money was intercepted in Britain, and "lost"(2).

 

Icelanders travelling abroad were viewed by customs officials with extreme suspicion. Some of those living in other countries lost their jobs or were kicked out of apartments. As Jonsson notes, "most ordinary Icelandic citizens felt as if they had been expelled from Europe" (1). With one swipe of the pen, Gordon Brown "had brought the Icelandic economy to its knees". For Icelanders, "it was tantamount to a declaration of war".

 

Indeed, it was ironic that Britain, with its long colonial history of invading and occupying other countries (including, briefly, Iceland in 1940), should be throwing the "terrorist" label on Iceland, a peaceful country that, although it had a coast guard, did not possess an army. Iceland was even a fellow member of NATO, but that didn't count for Gordon Brown.

 

Britain's action illustrates the potential danger today of anti-terrorist legislation, which has become an "all purpose" weapon for various governments to justify indefinite imprisonments, assassination of their own citizens (as with recently adopted U.S. presidential powers), intrusive spying and surveillance, drone attacks on foreign territories, and "black ops" of various kinds. Besides going after individuals, it now appears certain big powers will use such "anti-terror" legislation - as is clear from Iceland's case – not only to not marginalize any country that does not go along with their demands, but also to collect on what they declare to be "bad debts".

 

Icelanders were angry. This was real "dirty pool" on Britain's part. In a later speech to the World Economic forum in Davos, Iceland's President Olafur Grimsson bitingly remarked to the audience that "for centuries Gordon Brown will be remembered in Iceland long after he is forgotten in Britain" (3).

 

So Iceland's economy was in a shambles. Evidence was emerging of fraud, insider trading and manipulation of funds in Iceland's banks. In addition, Iceland had been designated a "terrorist state". There was no doubt that the banks, along with international hedge funds, currency manipulators, and foreign governments had all played a major role in the financial and economic calamity that had descended on the country. But so had the Icelandic neo-liberal coalition government and its Prime Minister Geir Haarde. Icelanders wanted answers from the government, and they wanted justice to be meted out to the perpetrators of this colossal mess. But this didn't appear to be forthcoming.

 

Icelanders decided to make some noise. They got into action.