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Party is over for chastened Iceland

Thu, Oct 9 2008, 17:46 GMT
http://www.afxnews.com

REYKJAVIK, Oct 9 (Reuters) - The party's over now for chastened Iceland, a nation that had lived beyond its means for years.

People are angry and afraid after their once-gleaming economy virtually imploded in a matter of days, an early and spectacular victim of the financial tsunami that has roared around the world.

At the massive Hallgrimur's Church that looks over the capital Reykjavik, pastor Birgir Asgeirsson spoke about the pain and trepidation that have swept the island.

"I can feel much anxiety in the people I talk to because they don't know what's next," he said. "People here are proud. If we don't pay our debts, that's a catastrophic feeling for almost every Icelander.

"People are worried. People are angry."

Sara Dis Tumadottir, a sales assistant at a tourist shop in Reykjavik, admitted she was scared about the coming weeks and months.

"Icelanders are so used to good things," she said. "Everything will get more expensive, so people will not spend as much now."

Iceland woke up on Thursday to find Kaupthing, its largest bank, had been taken over by the state, drawing the curtain on years of economic growth that allowed the nation of 300,000 to live well beyond what it could afford.

But they are also waking up to the fact that the collapse of the overambitious Kaupthing only marks the end of the first stage in a longer, more painful process.

Prime Minister Geir Haarde has said it will take years for Iceland to recover, and Icelanders should get ready for a drop in the living standards they have come to expect.

SPECIAL COUNSELLING

A special counselling centre will open on Friday.

"We have to take into account that there are thousands, dozens of thousands of individuals in Icelandic society who have been hit by what has been taking place over the last week or so," said psychiatrist Engilbert Sigurdsson from Landspitali University Hospital, who is overseeing the centre.

"My take on the general feeling in society is that there is not panic. There is a lot of appropriate concern and anxiety ... (but) I don't expect any mayhem," he said.

Sigurdsson said he had already been in touch with Iceland's banks to provide support to staff.

Sigurdsson said, however, that the sheer scale of the collapse could make it easier for people to cope.

"People are relatively open about this because so many are hit. In some ways, it will be easier to be in financial dire straits over the next weeks and months than it has been in the era of economic prosperity and boom," he said.

"(And) people may think this (crisis) is not such a bad thing ... If you live like princes, you have to expect that the ball will come to an end at some stage," Sigurdsson said.

At the Hallgrimur's church, pastor Asgeirsson said he was overwhelmed by the speed of the collapse, but felt a chastened Iceland could weather the crisis.

"When a nation is a small one, it's like a family. If something happens, everyone is ready to stay together," he said.

"You hear people all over saying 'we have to change our way of life'. Now they will have to go to their mother's kitchen to learn a fish recipe," he said.

(Reporting by Brett Young; Editing by Giles Elgood) Keywords: FINANCIAL/ICELAND SCENE

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