PM: foreign meat can change your behaviour

Icelandic PM Sigmundur David Gunnlaugsson discussed Iceland’s opportunities in producing and exporting pure healthy food in a radio interview today. Gunnlaugsson believes it is important that we do not use “additives, steroids, hormones and such” in the production of Icelandic meat.

“But also, no less important, that we are free from various infections, which, unfortunately, are much to common in many places and is not just harmful to the animals but can also be harmful to people. For example, there exists a virus that causes people’s behaviour to change. If you eat, e.g., meat abroad that is not sufficiently cooked, especially, then you risk ingesting this infection and it can lead to changes in behaviour patterns. People have speculated and investigated whether this could change the behaviour of entire nations. This sounds like science fiction,”

Radio hosts interrupt and ask, - where has this come up?

“This is very common, for example, around central Europe, France, especially, and Belgium. In fact common around the world, to varying degree, but some countries are exceptions, where there is little of this, this toxoplasma. These are Iceland, Norway, and Britain, interestingly enough. There, people are relatively safeguarded from these nasty creatures.”

(Translated from DV)

Sigmundur David Gunnlaugsson

(photo from PM's homepage. I did not do any airbrush...)

President and First Lady separate to dodge taxes?

It was reported earlier this month by Fréttablaðið that Iceland's First Lady, Mrs. Dorrit Moussaieff, moved her legal residence to Great Britain in the end of 2012. In the census bureau's database the President couple is registered as 'married but separated' ("Hjón ekki í samvistum").

Understandably this got some attention in the media.  Mrs. Moussaieff and the President were quick to affirm that they were not at all separating, and that the First Lady was not moving permanently to England, "I could never leave Sámur (her dog), Ólafur could visit me but Sámur couldn't" said Mrs. Moussaieff jokingly to reporters.

Mr. and Mrs. President

The law in fact states that a husband and wife should be registered with the same residence, unless they have separated. It has however been reported that the census bureau allows couples to register as formally 'separated' when either spouse has moved and works abroad while the other stays in Iceland.

The First Lady has explained that the reasons for the legal move has to do with her taking over more responsibilities in her family business, a distinguished and old jewelry company, and that since she spends more than 90 days in England, she should be registered with her residence there. (She has not said exactly how much time she stays there and how many days she is in Iceland though, and the press hasn't asked her.) She said her parents were getting quite old and she had started to plan this in the spring of 2012 when she expected that her husband would step down as President. He however announced later that same spring that he would run for a 5th term and was indeed re-elected in June 2012, but that apparently did not change his wife's plans.

In August of last year it was reported that the First Lady paid no wealth tax in Iceland. The Moussaieff family fortune is worth tens of millions of pounds. "The income and property of Mrs. Moussaieff is abroad and is taxed abroad" said in a very short response from the President's office to Viðskiptablaðið, who broke the story. I cannot find whether Viðskiptablaðið or any other news media ever asked a tax lawyer whether this seemed ok.

When asked about the residence move, Mrs. Moussaieff insisted this had nothing at all to do with taxes. It was further reported that the couple's tax advisor is a former director of the Tax Office.

However, the day before yesterday, it was reported that the Ministry of Finance is investigating the tax issues of the First Lady. The Ministry has however declined to give any details, as this concerns an investigation into private matters.

As an interesting anecdote to this story, it may be added that the President himself was the minister of Finance in the years 1988-1991, and earned the nickname 'Skattmann' (Taxman).

"Skattmann" scene from the New Year's Eve TV Satire show in 1989

Geothermal - no so green?

Iceland is proud to proclaim to the world how lucky we are to have ample sources of clean renewable energy. About 90% of all houses are heated with geothermal heating and electricity is produced by hydropower and geothermal power plants.

In Reykjavik the first house to be heated with geothermal water was the newly built Austurbæjarskóli, in 1930. The water was pumped from the Laugardalur area. Laugardalur is actually in my neighbourhood, this is where the big outdoor Laugardalslaug is today and were women would bring clothes and linnen to wash in natural hot water in outdoor communal washbasins.

Washbasin in Laugardalur, early 20th century. You can still see the remains of the basins today.

The technology spread and a few decades later the city was heated almost exclusively geothermally. The growing city and increased demand meant that water had to be pumped from further afar and from more depth. With more sophisticated technology and investment, superhot water can be reached hundreds or even thousands of meters below the surface, which can be harnessed for making electricity with steam turbines. The geothermal plant in Svartsengi was started in 1976 and today four such plants are operated in the country, producing 800 MW of electrical power.

Svartsengi geothermal power plant

This sounds really great, we don't have to burn fossil fuels but can simply pump up hot water, convert the heat to power, and pump the water back down again.

But reality is not quite black and white. Geothermal is - not quite yet - the ultimate totally renewable 100% clean energy source that we would like it to be.

First, one must realise that 'low temperature' water use, such as pumping 80-100°C water from 50-100 m depth and circulating for heating houses, is something quite different from 'high temperature' water use, where superhot water (250-300°C) is pumped from maybe >2000 m depth.

When you pump up superhot water, you get other stuff up as well. Quite a bit of CO2 is dissolved in the hot steam. The CO2 emission are much less per unit produced energy then in a coal or gas fired power plant, but still they are not negligible. According to a report from the Iceland Energy Authority, geothermal electricity production releases about 12% of the CO2 that a conventional fossil fuel burning plant would emit. In fact, an Iceland based company has just built a pilot scale plant to use some of the CO2 and convert it to methanol fuel.

Other pollutants are of more immediate and local concern. The 300 MW Hellisheidi plant located about 25 km from the eastern suburbs of Reykjavik releases so much SO2 (sulphur dioxide) that the air quality of the city substantially decreased after the plant was started in 2006. Three times in 2011 the sulphur in the atmosphere was above maximum permitted levels according to health regulations.  Morgunbladid reported this spring that Icelandic sound studios now notice that their expensive high quality mixers (that have real silver leads) don't last nearly as long as they should. "A few years ago you would set up new equipment and you didn't have to think about it until some years later when you would clean it, replace worn out switches and such. Now, the whole thing starts to crackling and hissing in a year or two" says sound technician Jakob Tryggvason.

It took me some time to find actual numbers for the sulphur emissions, but I finally found a response that the minister of environment gave to Parliament two years ago. 60.000 tonnes is the estimated amount of emitted sulphur compounds from the geothermal plants, calculated in SO2 equivalents. That is 4x more than all other emitted sulphur in Iceland, from all other sources combined ("man made"), including aluminium smelters, all other industry, trucks, ships, etc.

The sulphur emissions vary between the different geothermal plants, there is much less from the Svartsengi plant (by Blue Lagoon) than from Hellisheidi. (This is thought to be because the hot water below Hellisheidi is closer to a magma chamber.) Hellisheidi is also the largest geotherma plant in Iceland, producing about 38% of the total geothermal energy. This means that a substantial part of the 60 ktonnes of sulphur emitted into the air comes from this one source close to Reykjavik. (I have read that the staff at the plant don't want to drive their own cars to work and park them all day because of the corroding air and silica precipitates from venting steam.)

Steam vent at Hellisheidi. (I ruined the filter on my camera lens when shooting this picture.)

If I have understood this report correctly, all the 27 EU states combined emit about 8.000 kilotonnes. 60 ktonnes might sound like a lot less than 8.000, to be exact it is 0.75% - three quarters of one percent. But keep in mind that the population of Iceland is 0,320 million compared to EU's 502 million citizens - Icelanders are 0,06% the size of the EU population. This means that sulphur emissions from Iceland's geothermal power plants per capita are 12.5 times more than the total per capita sulphur emissions in EU!

Clean energy? I don't think so.

Apart from these serious environmental concerns, other challenges come with geothermal plants. Some of these the citizens of Reykjavik have come to learn the hard way. It is difficult to predict in advance how much energy can be harnessed from a particular geothermal area. Therefore it is generally recommended to build up utilisation incrementally, start with a relatively small plant and see how the system behaves, and then stepwise add to the plant. In Hellisheidi, the directors of the Reykjavik municipal energy services had no patience for that, this was in the heydays leading up to the crash; everything should be big and fast, and the energy providers needed a big plant to provide energy to an expansion of the Grundartangi aluminum plant.

The consequences, besides the surprisingly high sulphur pollution (and foreign currency financing of the plant that badly hurts the budget of Reykjavik and have caused higher heating costs for Reykjavik households), is that the 300 MW plant seems to be draining too much energy from the Hellisheidi area, today it is only producing 276 MW of energy and the capacity goes down by about 2.3% per year.

Hellisheidi power plant

Apart from, this, the operators at Hellisheidi are having some difficulties getting rid of the quite enormous amount of water that is pumped up, which contains a lot of dissolved chemicals - minerals, salts, silica compounds, heavy metals and other non pleasant stuff that must not get into the ground water. After the heat is extracted from the water it must somehow be disposed safely. The run-off water has been pumped back down using designated boreholes but reports tell that the receiving capacity of the return boreholes is diminishing. (Each borehole costs millions of Euros to drill.)

So when you hear the president give one of his talks about the wonderful sustainable renewable and clean energy of Iceland (such as this one where he mentions clean energy 22 times), take it with a grain of salt. He gives a rosy view of a more complex and challenging issue.

For more, see also:

Saving Iceland - Hellisheidi: a geothermal embarrassment
The Iceland Weather Report - Yet another train wreck on the environmental front

My forefather Einar

I am named after my great grandfather, Einar Jóhannesson. He was born in the year 1862, the youngest of eleven siblings, nine of which lived to adult age. Einar was a fisherman in the Westfjords, became a "foreman" on a fishing boat, the captain of the crew. Until early 20th century, Iceland's fishing fleet mostly comprised of small open rowing boats, typically with a crew of six or eight men. The boats and fishing gear had not changed much for centuries. This was a primitive and dangerous occupation.

Einar married my great grandmother, Ragnhildur in 1885. They lived in different places in the northern Westfjords, for a number of years in Bolungarvík, which is just north of Ísafjörður. Just outside Bolungarvík, an old fishing station from my great grandparents' time has been renovated and rebuilt and is today a museum.

I visited the Ósvör museum a few years ago and I very much recommend it. Take some time if you stop and imagine how life was just over 100 years ago. Make sure you get a chance to listen to the museum curator, a great storyteller. We stayed for more than an hour as he told us about the daily life of the fishermen.

In these times, people lived all around the Westfjords, the area was known as a "chest of food", because of the fishing grounds, birds and seals, that helped people survive the long winters.

This is the kind of boat my great grandfather was on. This one could be rigged with a mast and a basic sail, which made life a little easier if the winds were favorable.  If you come to Bolungarvík as a tourist, it is most likely summer time , but it was the winter season that was most important for the fishermen, many of whom were farm hands in the summer time.

Skálavík, probably spring time.

Einar and Ragnhildur also lived in Skálavík, a tiny bay that faces the open ocean of the North Atlantic. It lies close to the fishing grounds, which mattered as it could save hours of rowing, but it must have been windy and bleak in the harsh winters. 

Later they moved to Ingjaldssandur in Öndunarfjörður, where they lived on a small farm called Álfadalur. This is a more inviting place than Skálavík, and this is where my grandmother Elísabet spent childhood years.

Ingjaldssandur, Álfadalur was to the left, close to the sea.

I am not sure if Einar was still on a boat crew, but he probably kept on fishing, along with farming the homestead. Slowly but surely the times were changing in the early 20th century. The fishing villages grew bigger and the rigid social structure of the conservative farming society loosened. The boats got motorised but the sea was still treacherous. In September 1921 the motor boat Valþjófur caught a storm and went down with a crew of four, including Einar's son Pétur, the brother of my grandmother, and the captain of the boat, Kristján, who was Einar's son in law, married since two years to my grandmother's sister, María. María was left with a two year old son and pregnant. But she was a strong and determined woman. She had the wooden house that Kristján had just built taken down and shipped over the fjord to the hamlet Flateyri, where she earned a living by selling accommodation and meals to workers. You can still see her house in Flateyri, named Maríuhús. She managed to raise her two children well, and her son later became the 'Speaker' of the Icelandic Parliament.

The book Heaven and Hell by Jón Kalmann Stefánsson (available in English and other translations) is a great account of these times in the Westfjords and the harsh lives of fishermen, and it is also a beautifully written quite superb novel. (see a review).

Take it with you when you travel to the Westfjords, a region of Ieland not to be missed! I read it last fall, and it is one reason why I have wanted to learn more about my forefathers and their lives. I'll write some more as I manage to assemble more pieces of their history.

Remains of a fishermen's hut in Breiðavík.

Progressive fairytales

The first post on my new English language blog site. I've been writing blogs in Icelandic for some years now. This is sort of a personal experiment, my thoughts on things happening here in Iceland. A mix of politics (not too much!), nature stuff, traveling, history, music, and whatever comes to mind.


Iceland's left wing post-crisis government was ousted from power in the election on 27th April. Even if foreign media had actually praised PM Johanna Sigurdardottir and an her crew, they had to face the reality of other austerity governments, you don't get popular by cutting services and raising taxes.

Johanna Sigurdardottir, Prime Minister of Iceland 2009-2013, the world's first openly gay PM.

The austerity measures Iceland had to endure were really not that bad though, compared to many other crisis countries. The IMF rescue deal allowed the Government to gradually close the whooping post-crash budget deficit. (46% in 2008!) But the government didn't really succeed convincing their people that they'd done a pretty decent job. They also had to manage disunity in their own ranks and failed at achieving some (maybe too grand) goals such as renewing the constitution and overhauling the fish quota system.

The big winners of the election are the centrist Progressive party lead by 38 year old Sigmundur Gunnlaugsson, who right now is now attempting to form a new government with the right-wing Independence party. Gunnlaugsson doubled his party's following by promising substantial debt relief to ordinary homes. Not everyone believes in his free-lunch-at-no-cost plans.

Sigmundur Gunnlaugsson, possible new PM? 

To understand Icelanders' debt frustration, one should remember that in 2008, the rate of the Icelandic króna against other major currencies fell by about 50%, mid-year 2007 you paid 82 kr for a Euro, by the end of 2008 the rate was at 170 kr. It has not recovered much, fluctuating between 150 and 170 kr ever since. In effect this meant that ordinary savers lost half of the real value of their money, if you calculate in a "real" currency, and salaries were cut by half!

Of course, this massive devaluation of the króna was not all bad, since it gave the export industries a boost and in effect lowered salaries drastically without the difficulties of having to cut nominal wages. Devaluation is psychologically much easier than lowering the nominal salary figure you get paid. (Nobel laureate economist Paul Krugman has hailed this as a terrific advantage of Iceland, not being stuck with a too strong currency like southern European crisis countries, and one explanation of Iceland's survival and relatively smooth path to recovery from the bank implosion, though the so-called "Icelandic miracle" has been a matter of debate.)

Having had chronic inflation pretty much all 20th century, Iceland has made much use of inflation indexed loans, since 1979 or so.  An indexed loan means that if inflation is 4%, your loan goes up by 4%. That is, in addition to the nominal interest. That means that if the interest is 4%, you really pay 8% total interest that year (4% nominal interest + 4% index increase, to cover the 4% "loss" of value). I know this sounds strange to readers in most countries, but this is one way try to maintain the value of money in a high-inflation economy. But as many clever solutions to complex problems it does create a set of new problems.

Inflation in Iceland 1956-2012 (source)

So let's go back to 2008-2009; with the sudden fall of the króna, inflation went up and in less than a year the principal of your indexed mortgage went up by 20%, while housing prices decreased and wages essentially were unchanged. All in all, in 2008-2012, regular indexed housing loans went up by roughly 40%, whereas nominal salaries went up on average by 25% (in Icelandic krónur, which, as mentioned earlier, are still worth only half of what they were five years ago).

Gunnlaugsson, the victorious Progressive leader, fist entered politics in 2009 when he was surprisingly elected party chairman shortly after the bank crash. (He really deserves a whole blog post all for himself!) He proposed in 2009 that all indexed loans should be cut by a flat 20% discount (the surprise "shock" rise of the index in '08-'09).  No other party thought that was feasible and instead the left-wing government that took power in 2009 devised measures to help out some of the heavily debted households with specific debt relief programs. (This to some meant that reckless spenders were being helped while more prudent households were left with their "shock" loans.)

Gunnlaugsson however stuck to his idea that dept must be reduced across the line. One problem is that a big portion of housing loans are lent by the state Housing Financing Fund, which is mostly financed by pension funds. So general debt relief of 20% would mean that pension funds would essentially face the same loss, unless the state (tax payers) somehow cover the costs.

In the campaign for the 2013 election, the Progressives came up with a magic bullet plan to relieve debt without hurting the housing creditors! See if you can follow:

The current banks in Iceland are mostly owned by foreign creditors, keep in mind that the previous banks defaulted (the bankruptcy of Kaupthing bank was the 6th biggest in world history, Landsbanki and Glitnir came in as no. 10 and 11 in the world record list, respectively). Enormous sums were written off but the remaining assets went to the creditors of the banks. A lot of the assets have since changed hands, the bulk now in the hands of foreign equity funds (they got these assets pretty cheap when recovery was still uncertain).

Icelanders don't want their entire bank system in the hands of "vulture funds", and the equity funds don't want to be stuck with their money for too long here. Problem is, they cannot exchange their Icelandic króna assets to foreign currency, that would drive the rate of the króna through the floor, and there simply isn't enough currency around, even if all the IMF-lent currency reserve funds were used up. (This is why we still have capital controls in place.)

The thinking now is that in order for the creditors to release their funds the Government will somehow have to negotiate their exit on a severely discounted króna rate, something like a 60-70% discount, and even that will still be problematic. Along comes Gunnlaugsson and his creative advisers and claim that the discount will create a balance in the books of the Government and that this "money" can be used to lower everyone's housing debts without any loss to the housing creditors. Believe it or not, this is actually what Gunnlaugsson sold to his electorate.

There seems to be a lot of caveats here, to say the least. Won't somebody have to buy the bank assets for "full price" from the Government? Should not the Government instead reduce the enormous public debt (which, at effectively 130% of GDP, is borderline sustainable), instead of lowering everyone's mortgage? Can we convince foreign equity funds that their krónur are only worth a fraction of their rate, while still maintaining faith in the face value of our krónur?

So there are interesting times ahead in Icelandic politics. Few people really think that the bold Mr. Gunnlaugsson's ideas are realistic, but his electorate seemed to think that at least he cared about their problems. If his magic would work we might actually deserve the envy of other European crisis countries, where many believe that Iceland stood up to the whole international banking establishment, did not bail out banks, jailed the bankers and relieved indebted homes, which is not quite true.

Let's see what happens. I'll try to keep you updated!

Independence Party chairman Bjarni Benediktsson and Sigmundur Gunnlaugsson, during a break in their early-stage government forming negotiations in a summer house by Þingvallavatn. Relatively young, but to some their parties are still too tied to the Icelandic 'Old boys' crony capitalism.