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The Importance of Political and Economic Sovereignty in Iceland

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Iceland is a stable democracy in which human rights are a major concern and focus of government (Olsen, 2010). Prior to the financial crisis, the assets of Old Landsbanki, a major European bank, were frozen in the United Kingdom under the Anti Terrorism, Crime and Security Act from 2001 (Iceland Chamber of Commerce, 2012). Though this is just one example, this closure of activities from Old Landsbanki has significant financial consequences for the Icelandic banking sector. In this instance, the United Kingdom had the regulatory powers established to intervene in banking assets without consultation with other EU member countries.

This is primarily why Iceland deems economic sovereignty important in the country as many banks are connected with international capital and investment markets, allowing subsidiaries to be regulated by a foreign government and not the Icelandic government system. When other countries can impact the stability of financial trading partners, it lessens control over the Icelandic government to guarantee the longevity of international banks impacting domestic financial stability. Iceland is left, in many situations, to have to appeal to NATO, the EU or the WTO to gain advocacy and intervention when foreign political actors have domestic or international authorities to disrupt the Icelandic financial system and its stability.

As head of state, it would be crucial for Iceland to continue to push for membership in the European Union. Even though Iceland values its political and economic sovereignty, the country needs more influence in setting international laws that currently impact the financial system in Iceland either directly or indirectly. As one example, a recent situation occurred where a charity organization known as Naomi House went bankrupt virtually overnight.

Naomi House was a hospice located in England sustaining 8.7 million USD in assets that were held in Icelandic banks (Forelle, 2008). These assets were frozen by government agents in the United Kingdom and will likely never be available again as valid deposits for Icelandic banks.

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