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Viewing cable 09REYKJAVIK39, ICELANDIC CENTRAL BANK HEAD PUBLICLY GOES ON DEFENSIVE

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Reference ID Created Released Classification Origin
09REYKJAVIK39 2009-02-25 17:05 2011-01-13 05:05 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Reykjavik
VZCZCXYZ0012
PP RUEHWEB

DE RUEHRK #0039 0561707
ZNR UUUUU ZZH
P 251707Z FEB 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 3991
INFO RUEATRS/DEPT OF TREASURY WASH DC
UNCLAS REYKJAVIK 000039 
 
STATE FOR EUR/NB 
TREASURY FOR ERIC MEYER AND LARRY NORTON 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: PGOV ECON EFIN IC
SUBJECT:  ICELANDIC CENTRAL BANK HEAD PUBLICLY GOES ON DEFENSIVE 
 
1. (SBU) Iceland's Central Bank Chairman of Board of Governors David 
Oddsson refused to accept blame for the October bank collapse and 
subsequent economic recession during his appearance on Icelandic 
State Television's current affairs program "Kastljos" on February 
24.  Well-prepared and often portraying himself as a victim, Oddsson 
confronted the interviewer from the start of the program by refuting 
the assertion that he did not have the trust of the public:  Oddsson 
called a recent poll stating that 90 percent of Icelanders want him 
to resign as inaccurate.  The embattled Central Bank Chairman 
continually returned to three main themes throughout the interview: 
1) he and the Central Bank had repeatedly warned the Haarde 
administration about the state of the Icelandic banking system; 2) 
the fault of the collapse lies with the Haarde government, and the 
banks themselves; and 3) the Central Bank has kept the economy 
afloat after the crash and he and the institution enjoy the trust of 
the people and international community. 
 
2. (SBU) Oddsson supported his points by quoting passages from 
several Bank reports warning the government of the impending crisis 
(but declined to release the documents.)  He said that he was 
confident a full investigation into the cause of the banks crash 
would exonerate him and the Central Bank.  When asked why he does 
not step down and allow the rebuilding process to fully begin, 
Oddsson declared that he is still trusted in his position.  The 
interviewer read a list of domestic politicians, economists, and 
foreign experts who have called for Oddsson's resignation to restore 
trust in the Icelandic Central Bank;  Oddsson responded that those 
individuals had either a hidden agenda or were not familiar with 
international economic policy.  He called the current Prime 
Minister's Central Bank reform bill, which restructures the Bank's 
leadership to eliminate Oddsson's position, "nonsense" and accused 
the PM of settling an old political score.  Oddsson said the Central 
Bank has kept the economy afloat in the wake of the crash and that 
it was the Central Bank that foreign creditors trusted to insure 
transactions.  Finally, when asked if he would entertain the idea of 
re-entering the political area, Oddsson noted that he had no 
intention of returning to politics.  Speculation in Iceland, 
however, is that Oddsson was using the interview as a platform to 
reignite his political career. 
 
3. (SBU) Comment:  Oddsson's performance on Kastljos was political 
theater at its most florid, confirming Oddsson sees himself as the 
last great bulwark standing up to a destructive and incompetent 
government economic and financial structure.  Those close to former 
PM and departing IP Chair Geir Haarde have marveled at Oddsson's 
stubborn determination and his disregard for the damage his 
continued tenure is causing the IP.  This was clearly evident in his 
willingness to publically blame Haarde and his government for 
Iceland's economic collapse - and this despite the fact that 
Haarde's refusal to fire Oddsson, his old friend and mentor, was one 
of the chief reasons for the fall of the previous government. 
Oddsson is correct in his assessment that most of the provisions in 
the proposed new Central Bank law are directed at him personally. 
What he did not acknowledge is that his continued presence at the 
Bank has become a severe distraction as the economic crisis deepens. 
 Oddsson is now such a polarizing figure that we doubt any 
government can concentrate on Iceland's reconstruction while he 
remains at the Central Bank.  Oddsson left no one in doubt last 
night that he will continue to run rings around the interim 
government as he fights off attempts to separate him from the job. 
Not for nothing was Oddsson the most charismatic, crafty, and 
resourceful politician in Iceland's recent history.  The question is 
whether that old magic will work with a battered people looking for 
answers as to how their economy fell so far so swiftly, and hungry 
for new political leadership able to point the way out of the 
catastrophe. 
 
 
VAN VOORST