Geir Haarde, the former prime minister of Iceland and the only politician in the world to face prosecution for his role in the 2008 financial crisis, has been found guilty of failing to hold emergency cabinet meetings in the runup to the crisis. But he was cleared of three more serious charges, which could have jailed him for two years.
Haarde, who served as prime minister between 2006 and 2009, had pleaded not guilty to all the charges, including gross negligence over the government’s failure to prepare for the impending disaster.
Haarde attacked the guilty verdict as “absurd”, and accused the judges of bowing to political pressure. “It is obvious that the majority of the judges have found themselves pressed to come up with a guilty verdict on one point, however minor, to save the neck of the parliamentarians who instigated this,” he said outside the country’s specially convened Landsdómur criminal court in Reykjavik.
Haarde was the first person in history to stand trial at the 15-judge court, which was created in 1905 to hear any charges brought against ministers.
Haarde fell from power after the country’s three biggest banks collapsed, the country’s economy went into meltdown, and the government was forced to borrow $10bn (£6.3bn) to prop up its economy.
During the trial, he said: “None of us realised at the time that there was something fishy within the banking system itself, as now appears to have been the case.
“I think it’s illogical to think that I or anyone else in the government could have reduced the size of the banks to a greater extent than was done at the time.”
Haarde was instrumental in transforming Iceland from a fishing and whaling backwater into an international financial powerhouse before the credit crunch caused the economy to crash almost overnight.
He was accused of failing to rein in the country’s fast-growing banks, whose paper value before the crash had ballooned to 10 times the gross domestic product of the island state of 320,000 people.
The country’s three biggest banks – Glitnir, Kaupthing and Landsbanki – went bust within weeks of each other after the collapse of Lehman Brothers in the US sparked the credit crunch, in 2008.
Haarde, 61, was also cleared of charges related to his failure to prevent the contagion from spreading to the UK by not insisting that Icelandic banks ringfence their overseas operations. The crisis sparked a diplomatic row with the UK as the demise of Landsbanki brought down its British internet banking arm, Icesave, leaving British councils, universities and hospitals more than £1bn out of pocket.
Gordon Brown, the prime minister at the time of the collapse, accused Haarde of unacceptable and illegal behaviour over its failure to guarantee to reimburse UK customers of the bank. The British government stepped in to protect most savers, at a cost of £3.2bn, but it is continuing to demand compensation from Iceland to cover the cost.
The crisis also led to the demise of the British retail investor Baugur, which owned stakes in House of Fraser, Debenhams and Woolworths.