ECONOMIC GLOOM: Since the first volcanic ash cloud eruption last year, crisis-stricken Iceland has slipped into a pessimistic mood, writes BALDUR ARNARSONin Reykjavík
FIRST CAME what Icelanders stoically labelled an eruption for tourists in the Fimmvörðuháls area – an ash column and elegant flow of lava in March 2010 that pleased the eye and the cameras.
Several weeks later the much-anticipated report by the special investigation commission into the origins and causes of the economic collapse was published.
But then came the ash clouds.
Less than 60 hours after the report was introduced with much fanfare, its revelations were overshadowed by the Eyjafjallajökull eruption.
The eruption was everything but elegant. The violent spew of volcanic ash threatened the livelihood of numerous farmers and the tourism sector – one of the pillars of the €9 billion economy – suffered a collapse in bookings.
The island was thrust into an alternative crisis mode.
Dreary economic analysis was replaced by headlines about the disruption to international air travel caused by the towering column of ash.
Somewhere in between a feel-good factor sneaked in. For perhaps the first time since pop singer Björk rose to international stardom, Icelanders again enjoyed a world attention that was not rooted in the folly of overambitious bankers.
To follow was an unusually warm summer. Tourists returned in record numbers. The economy seemed on the mend.
A sigh of relief was heard at Reykjavík cafes. But then came the autumn.
The gloomy economic reality again settled in the national consciousness. Unemployment increased for the third consecutive autumn to its post-crisis norm of 7-9 per cent.
According to Gissur Pétursson, chairman of the directorate of labour, such persistent figures have not been seen since the 1930s in a nation of historically low unemployment.
Furthering this point, thousands of Icelanders have voted with their feet and looked for job opportunities abroad, many in oil-rich Norway.
Adding to the unemployment and emigration, the devaluation of the Icelandic krona in recent months – the euro was standing at 83 ISK in May 2007 but now buys 164 ISK – and lack of foreign investment have contributed to an economic slowdown.
The result has been a dramatic decrease in purchasing power. Imported goods have in some cases doubled in prices since the boom years.
The ageing car fleet perhaps best represents this reversal. Should the situation not improve, Iceland will soon be on a par with eastern Europe in terms of the age of the car fleet, according to an analysis by the Icelandic Federation for Motor Trades and Repairs.
Record oil prices have also decreased the scope for personal consumption, with Gunnar Svalur Sveinsson, an expert at the Icelandic Travel Industry Association, arguing that “the situation is beginning to resemble the norm in undeveloped and emerging economies”.
"Many Icelanders can no longer afford to buy the services that foreign tourists enjoy on the island," he recently remarked in an interview with Morgunblaðið, a daily newspaper.
As to be expected, the poor have suffered most from the sharp decrease in purchasing power.
Nevertheless, it came as a shock to many when Guðmundur Magnússon, chairman of the Organisation of Disabled in Iceland, brought attention to the fact that hundreds of Icelanders are suffering from malnutrition due to their dire financial situation.
Add to this the almost constant political turmoil – three MPs from the Left Green Movement recently broke ranks, reducing the parliamentary majority to one seat – and the result is an annus horribilis.
As ash clouds return, hopes for a social revival have given way to pessimism on the economic front.
The recession-weary community is, therefore, in no mood for another struggle with the forces of nature.
Conferences have already been called off due to the disruption to air travel caused by the Grímsvötn eruption.
With economic growth supposedly relying on tourism and consumption this year, any loss of revenue will be strongly felt in the trade and service industries.
Unfortunately for the embattled government, the spewing of volcanic ash, expected to recede in the coming days, is unlikely to put the grim economic reality aside for long.
Should the situation not improve, desperation might bring about another but more violent wave of protests. This time around bricks and sticks might replace the pots and pans of the 2009 saucepan revolution.