Interview Silfur Egils 2 December 2012. Topics covered

1. What is happening in Spain? How is the crisis affecting my native country?

The tsunami of the financial crisis has arrived to the Spanish shore and the situation is very serious. Spain is facing this dilemma: to be rescued or not to ask for a rescue. The finances of the State have been stretched to the limit. There is a fiscal crisis, a sovereign-debt crisis, economic recession and 25% unemployment with a prediction of 27% for the next years. Young people face 50% unemployment. And there is a social fracture. Some people are loosing jobs, houses and fighting now for their dignity and hope while some sectors of the society are still travelling in first class protected by political affiliations, good pensions or other secured jobs. Put in simple terms, the social contract is broken for just too many. Like in Iceland many people think that a fatal link between bankers and politicians and the bet on easy money based on a construction bubble have now taken the country to a road with no exit. In this context there are some movements of protest that are trying to follow what they call the “Icelandic way”.

Most important on is the 15-M movement (15th May 2011) with strong support of public opinion that, however, fails to bring change through the current political system. Legislative elections in November 2011 did not renovate political arena. Three main slogans and claims:

1. “No nos representan“. Current politicians (and constitutional system) in Spain do not represent us. We are neglected as individuals, our voices are silenced and we are excluded. The time of transition after Franco is expired. There is a generational fracture.

2. “No tenemos miedo“. We are not afraid. We have hope.

3. “ Lo llaman democracia y no lo es“. Behind the mask of representation our voices are substituted by political actors who defend –in reality –other interests: those of political parties and big corporations or even trade unions.

But many other groups and protests:

Stop desahucios (Stop repossessions of property – overindebtness of families ) and Plataforma de Afectados por Hipoteca

Democracia real ya! (More democracy is needed)

Economistas indignados. Manifesto for economic alternatives. Strong criticism to the neoliberal ideology of the EU, the role of German Banks and Angela Merkel (Germany) in transferring the crisis to the sovereign-debt arena.

Debt is at the center of debate. Moral assessment of responsibility. Odious debt. New Marshall Plan for Europe recovery. EU reform.  Social/ ethical banking.

Also ATTAC and groups inspired by the Social Forum (Puerto Alegre). But not only. Protest has been recently arrived to the most unexpected agents as  even Judges and Police taking a moral stand and saying basta!!!! More recently, all Ombudsmen in Spain have made public a similar view as the Spanish Constitution promises a fundamental right for housing and obliges public authorities to fight against speculation in land use.

Social problems related to private debt and archaic legislation are so important that in November 2012 associations of judges and police trade unions announced they would seriously consider civil disobedience regarding the expulsion of families indebted in good faith who cannot pay mortages. The sparkling fire was a legal opinion (with just moral authority) of Advocate General Kokott (Court of Justice of the European Union) declaring Spanish civil procedural law incompatible with European consumer legislation on abusive clauses as it provides no opportunity of defense. You first loose the house, the debt follows you for life but there is a need to start a new procedure if an abuse has been committed. Some recent suicides from indebted have sparkled public discussions…

I am surprised but not completely. I was educated in legal philosophy by the Dean of the Faculty of Law of University Complutense (José Iturmendi Morales), with a strong focus on fighting legal positivism doctrines. A whole generation has been educated in that way. Our duty as lawyers would be to be always alert against abuses of law and to have the tools and competence to detect them and respond against them from/within the legal system.

As José Luis Sampedro puts it in a short way "the law is to be respected as long as it is respectable". This normative approach which limits the discretion of the legislative power is a response to the abuses of legality committed by public authorities along the Spanish legal history but it also applies in other countries such as Germany (ie. abuses of law under Nazi regime). José Luis Sampedro is a humanist writer and economist who has been given in 2010 the Prize Orden de las Artes y las Letras de Espańa and in  2011 got the National Prize of Humanities in Spain Premio Nacional de las Letras Espańolas

We learned therefore that civil disobedience is justified when one of the three necessary pillars of the law is not complied with: legality, ethics/fundamental rights and/or legitimacy. The main book on civil disobedience published by Maria José Falcón y Tella is done by a professor of the University Complutense, a disciple of the former dean (Martinus Nijhoff Publishers, 2004 - 487 síđur). The mere idea of civil disobedience is obviously a shocking thought for Icelandic lawyers and judges as Icelandic legal system does not consider legitimacy as a necessary dimension of law. For you if there is a revolution, this would be it.

But while the society is claiming for change, this is nevertheless very difficult:

Above all, movement calls for a new constitutional reform which would unfortunately open the Pandora box of nationalism/independentism and the nr. 1 taboo subject: is a Third Republic coming to Spain? Socialists and left wing parties are all republicans but accepted King Juan Carlos as a peace guarantor during democratic transition.

Is there any alternative to parliamentarism? A republic of the crowd is impossible in a 46 million country.  Democracy is both Heaven and Hell. Can we reform our democracy from democracy? Within democracy? Can we re-orientate it to the common good of some essential social values and not to the market and economic profit? If so, which is the way ahead? How can we do it? That is why they need to know all about Iceland.

2. My book: The Icelandic revolution. A victory for citizens

The book summarizes and translates what has happened in Iceland in the period 2007-2012. In a recent congress I attended on critical political analysis in Spain, I could confirm how the process we go through is not new in history nor it is new in political science. As in Spain, the financial crisis brings forward a process of dismissal (proceso destituyente) and a process of reconstruction (proceso constituyente).  Professor of political science and journalism Victor Sampedro who has visited Iceland two times has very kindly given his theoretical insights into this area. Both processes happen at the same time. This forces us to rethink our society and build a transitional framework. There is obviously a tension between Old concepts vs. New hopes which can last some decades. It is normal to feel lost, times of crisis are times where we need to think and search for new approaches, concepts, institutions to solve our problems. This is the main idea of the book inspired by philosopher Ortega y Gasset.

To the question what have we learned in Iceland? The answer for the time being is mostly of political nature as I do not think any economist would claim we have found the miracle to all our current problems and no legal changes are yet revolutionary. No matter how we build our future we are constrained by economic resources. We may also disagree on methodologies. At any case I claim that it is not possible to get out of the crisis without ethics and responsibility, critical and creative thinking and changing course.

In my view, the role of civic society is essential and I want to give them the merit ordinary men and women deserve. What I say is that citizens must help their societies and their leaders to go through this transition while claiming peacefully a new economic, monetary, legal and political order. A vote casted every 4 years is not enough. If there is an Icelandic revolution is this one: we all must assume our civic duties. The example of civic meetings (borgarafundur), more democracy through deliberation (ţjóđfundur) and the request of 24% of the electorate to vote on the nationalization of Icesave debt is a revolution for Spanish standards.

Politically the miracle is that citizens wake up to their duties and democracy. The claim that there is no parcel of power which escapes public scrutiny implies a change of mentality for all of us. It means we must prepare to educate ourselves. Change means thousands of hours that people have invested in studying and understanding difficult problems. In Spain to get people away from sofa, TV, sports, alcohol and other social events to read and to participate in politics is revolutionary. That is why the editor chose that title.

From a legal perspective I observe a trend of constitutional reform which is the same that arrived to continental Europe after IIWW: a model where popular sovereignty is affirmed vs. parliamentary representation. And, even more interesting, an imprecise claim put forward by citizens (Icesave) where the missing dimension of legitimacy (consent of the people – for the benefit of the people) is requested as a prerequisite to what is law (a posteriori though). This would mean that Icelandic citizens are reacting to legal positivism and agree more with the Spanish way of thinking about law (in terms of a triple legal test).

The constitutional reform process is also followed very closely and there is great admiration for us in this regard. Americans would call it “street law”. And I am proud I attended a training seminar abroad where they gave the honour of qualifying “street lawyer”, looking to the legal system from the perspective of the citizens.

But Attention: My title would have been Iceland: the revolution of the (im)posible because the changes that are needed to change course are so fundamental and radical that I wonder whether they can be achieved by our generation. In that way after reading the book one cannot decide for sure whether to be optimistic or pessimistic. As in life, things are not black and white. We move in grey areas trying to do our best. I give hope but I also cast light on the dark areas.

3. Most important ideas from the book which  are interesting for Icelanders:

We must move from merely superficial concerns or distracting issues in order to address systemic issues which are behind present crisis. What other reforms will help us out to build a better just and decent society? Ideas abound. The road before us is long but it implies a change of many issues: a focus on the real economy, human, social and sustainable development and the renewal of democracy. There are alternative ways of thinking about economy and money but these ideas are put aside by the international financial governance elite who is not elected democratically.

See Stiglitz´s Report to the United Nations 2009 on the urgency of an ambitious financial reform to contribute to a better world in a context of crisis and unsustainable natural resources and energy.

See Martha Naussbam, recent winner of the prize Principe de Asturias 2012 in Spain who for decades has worked to prove that the economy should be oriented towards people and ethics and not against them.

See other proposals such as the recovery of American monetary reform program of 1939 after depression or parked economists thesis and silenced by conventional economic theory as Silvio Gesell.

Gesell is my favorite economist these days for some of his ideas. This precursor of economist Keynes proposed for over a hundred years the establishment of a free economic model, a free market system unbound from financial capitalism where the state recovers its essential role in the creation of money without interest (free money) and where the whole system is reversed. Only money which operates in real economy will keep its purchasing power. Money used for speculation should loose value year after year.

Our current system is based on well hidden fact. After the trauma of hyper-inflation in Germany in the period before the II WW a golden rule was created: central banks must be independent from governments, they must never, ever, in no circumstances issue public money to rescue treasures. The problem now is that we have gone to the other extreme. Not only central banks are dependent on banking but we have given up this sovereign power of creating money to banking and credit institutions. They are the ones which have created –through our deposits and with no regulatory limit- a black hole of the universe: an amount of private debt so huge that is threatening our societies, states, and even the fundamental pillars of our democracies and civilization.

Why do we accept that banks –which have the responsibility for the tsunami - get unlimited credit from the European Central Bank at sometimes 0% while they borrow this money to the States at a rate of 7-8%? In Spain the problem is so acute that 25% of the 2013 budget will go to pay the interest of the debt of the State. It is morally wrong to raise taxes to serve the interest of sovereign debt while education, public health and social services are sacrificed. Austerity for the sake of austerity is simply suicide: the president of Brasil has recently visited Spain and said so. Do not do the mistakes of South America. Learn from us.

The film director Costa Gavras has put it bluntly in his most recent film THE CAPITAL when the director of the bank says to the shareholders: Now the bastards say the truth. Our policy will be “Lets steal from the poor to give it the rich.“ And a big clap follows. The casino game will continue until the next financial crisis which is around the corner. There is no way a country can produce goods and services to serve the debt which –by the magic of the compound interest - grows to infinite.

You may think that these are utopias but there are serious people promoting alternatives to our current capitalist system. One of them is Professor Bern Senf in Germany who predicts repression, civil conflict and war unless we change course. And, more recently, two economists at the International Monetary Fund have confirmed the validity of the so-called Chicago Plan from 1939. This means a separation of monetary and credit functions of banks requiring 100% reserve for deposits.

In USA estimate that this system would provide greater control over the cycles, eliminate the panic run on deposits, reduce public debt and private debt would reduce by not requiring the debt-money creation. Furthermore promote productivity by 10% and reduced to zero inflation. Here in Iceland Frosti Sigurjónsson has introduced these ideas and I totally support him in this regard. We also have the Icelandic Financial Reform Initiative which I mention in my book (see

Ethical banking is also growing in the world. Banks like Triodos in Spain and Holland or Ekobanken in Sweden which representative came to Iceland to this TV programme some weeks ago. Ekobanken only works on the basis of the deposits of the clients, they do not create extra money-debt on thin air and they deserve a compliment for its social goals. A small saving bank in Spain, Caja Ontanyen, has followed the same policy for more than 100 years and is one of the two saving banks which is left in Spain after the financial crisis. The Global Alliance for Banking on Values is an independent network of banks using finance to deliver sustainable development for unserved people, communities and the environment.


As you see there are many people working out there for alternatives. People like Martha Nussbaum who try their best to bring ethics to economy, to change the lens through which we see and interpret reality to stop concentrating on the Gross Domestic Product (GDP) and we look at human development, equality and distribution, progress as individuals and societies and even happiness.

People like Christian Felber who defends an alternative economic model explaining a necessary change of coordinates: from profit and competition to collaboration and search for common goods such as solidarity, social justice, respect for environment, transparency and democratic participation to name just a few. See his book The economy of the common good.

We might choose to be blind and deaf to new ideas but something is happening when even the research published by German bank Deutsche Bank is telling us that we will be not happier if we look just at the GDP.

Monetary and financial reform – Stiglitz Report to the United Nations 2009 – Conclusions as put by President of the United Nations

“The crisis is not just a once in a century accident, something that just happened to the economy, something that could not be anticipated, let alone avoided. We believe, to the contrary, the crisis is man-made: It was the results of mistakes by the private sector and misguided and failed policies of the public“

“The crisis demonstrates failure at many levels – of theory and philosophy, of institutions, policies and practices, and, less overtly, of ethics and accountability[...] Our multiple crises are not the result of a failure or failures of the system. Rather, the system itself  [...] is the cause of many of these failures“.

4. Many problems still pending. Example: verđtrygging (price-indexation of loans/mortgages)

In the book I also mention some problems which are very difficult to resolve in Iceland. One of them is “verđtrygging” and the necessary restructuration of private debt.

I have very recently done research on this problem and I have informed both the Parliament and Minister Steingrímur J. of my conclusions in European law. I have no verđtryggt loan so I do not have any private interest to defend here. I do not work either for other companies or associations. Conclusions are four.

1) The price-indexation of capital where the principal of the loan is unclear and indeterminate and grows clashes frontally with European consumer legislation. 2) Furthermore, we all know it is an abusive practice where all the consequences and damages of inflation are directly passed to the debtor without any benefit. 3) Abusive practices such as those are simply null and void in European law. 4) And, no, transparency and information in the precontractual stage do not legitimize abuse.

Conclusions of my research

Verđtrygging or the indexation of financial obligations to inflation is, in reality, real interest calculated a posteriori (instead of nominal interest predicted by financial institutions).

In my opinion that it is illegal in the light of European law to indexate the principal of the loan to inflation a posteriori (ex-post).

This is so because under Icelandic legislative proposal this means that the principal is left undeterminate and is unclear. Plan of payments is always wrong by definition as nobody can predict inflation. The total cost of credit is wrong. The European Directive works with the hypothesis, definition, methods and formula supposing we have a clear principal of a loan determinate. Consumers must know the total cost of the loan in advance.

European law considers two main options: the payment of nominal interest charges agreed beforehand (fix rates of interest) or revisable regularly (variable rates). European law does not work on the hypothesis of charging real interest a posteriori.

 Indexation of payments of interest (not the principal of the loan) could be ok if the method is properly disclosed ex ante (pre-contractual and contractual stages) and it is done through the technique of Annual Percentage Rate of Charge as the Directive requires.

 For these reasons, I have decided simply to write directly to the ESA and put before them 1-2 essential questions before the new consumer credit legislation is adopted by Icelandic Parliament.


And I can tell of you that, in this sense, the situation in Spain is helping a lot because Spanish judges are sending to the Court of Justice of the European Union essential questions in this regard to confirm that the nullity of consent for abusive practices or when the essential information about financial obligations is not given ex-ante. These questions that will be answered on consumer credit law will surely confirm what too many consumer advocates are now saying in Iceland which is the same that Spanish judges are doing in practice.

To conclude I only have two questions that I leave to all of you.

Why do Spanish people accept a level of unemployment that pushes their children into exile?

And why Icelandic consumers, companies and families accept such a regime as verđtrygging?

Those are for me the 1 million dollar questions. And regarding these problems there is no (r)evolution in sight.

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1 identicon

Excelente resumen de una gran entrevista, echo en falta el link a la misma y aquí lo dejo:    a partir del minuto 48:42

Mucha lucidez  junta, un placer escucharte como siempre.Te considero un faro en la noche de tormenta. Falta más gente como tú que puedan orientar el cambio que irremediablemente se va a dar en los próximos ańos. Estoy deseando pillar tu libro, y alguno más que nombras en la entrevista. Te envio mucho ánimo y fuerza y como te dije, cuenta conmigo si necesitas algo. 

Frábćr samantekt úr mögnuđu viđtali.  Ég saknađi ađ sjá ekki slóđina á ţáttinn svo hérna er hún:  fra min. 48:40

Ţú ert mjög árvökul og ţađ er einstaklega ánćgjulegt ađ hlusta á ţig. Ég sé ţig eins og vita í óveđrinu.Vantar fleira fólk eins og ţú sem getur stýrt óumflýjanlegu breytingunni sem mun gerast á nćstu árum. Ég ćtla ađ lesa bókin ţin sem fyrst og líka annađ efni sem ţú bentir á í viđtalinu. Ég senda ţér bárattu og stuđnigs kveđjur og láttu mig vita ef ég get hjalpađ ţér eitthvađ.

Jesús Rodríguez (IP-tala skráđ) 3.12.2012 kl. 21:57

2 Smámynd: Sigurđur Hrellir

Sigurđur Hrellir, 3.12.2012 kl. 23:47

3 Smámynd: Sigurđur Hrellir

Interview on YouTube:

Sigurđur Hrellir, 3.12.2012 kl. 23:51

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