Economy

Króna Crisis: A Place Where The Euro Still Shines

Mounting debt in Greece, Italy and elsewhere in the EU are raising serious questions about the future of the single currency. Things look different in Iceland, after a grave banking crash in 2008 makes the tarnished euro still look like a shiny replacemen

Cerstin Gammelin

When Gylfi Arnbjörnsson talks about the euro, his voice is tinged with longing. "What we need here in Iceland is a strong currency," says the president of the country's biggest labor union. Just so there's no misunderstanding about what that strong currency might be, he adds: "We need the euro."

The Icelander, like most of his countrymen, is proud of his small island nation located in the middle of the Atlantic. Nonetheless, he would just as soon see the Icelandic króna buried under several meters of lava. "The króna is so volatile, that every year it reduces our income, and with it our standard of living, by a fourth," he says.

Until 2007, Iceland was the fifth richest country in the world with a per capita gross domestic product higher than that of the United States by 60%. But things turned sour in the fall of 2008, when the island was devastated by the storm that enveloped financial markets worldwide. Within a week, the country's three big banks -- Kaupthing, Glitnir and Landsbanki -- went bankrupt.

The currency lost a fourth of its value, inflation rose to 18%, and Iceland's conservative government was torn apart. That was when, for the first time, a vague longing to give up their own currency manifested among many Icelanders, along with a growing desire to join the European Union (EU).

In 2009, the Icelandic parliament voted to apply for EU membership. Accession negotiations began last year. Chief negotiator Stefan Hankur Johannsson said the application process could be completed by 2013, adding: "We're on the right path."

However, with the possibility of Iceland joining the EU by 2016 at the latest, he did not wish to comment on whether or not its people would still want to by that time. For that to happen there would first have to be an agreement on farm subsidies, fiscal policy and regional grants. The biggest challenge, both politically and economically, is the fishing industry, about which Iceland would prefer that the EU have no say. Iceland's livelihood depends on fishing -- and from the exclusion of its competitors.

The latest polls indicate that Icelanders are divided on the issue. Nearly 60% say they know too little about the EU and its institutions, while two-thirds of the population favors completing negotiations and afterwards voting yes or no in a referendum.

Out of the abyss

Pall Vilhjalmsson, and the group of some 5,500 Icelanders that he spearheads, have a single goal: "to keep Iceland out of the European Union". They want negotiations for EU Membership to stop. When Iceland belonged to Denmark over 100 years ago it went through "bad experiences," says Vilhjalmsson, who finds it hard to believe that this country, which only became a republic in 1944, would be prepared to subjugate itself again to "foreign powers."

That Iceland, left to its own devices, has fallen into an abyss doesn't interest him. Nor does the fact that it is still severely weakened because of the 2008 financial crisis. Inflation is currently at 5%, and climbing. Not too long ago, the country had virtually no unemployment or government debt. Iceland now has to shoulder a 7% unemployment rate and debts amounting to 100% of GDP. Well-educated people are leaving the island. Investment is at a historic low. The banks have been severely weakened. The export of capital is strictly forbidden.

Finance Minister Steingrimur J. Sigfusson is trying to stay optimistic. In July, for the first time since 2006, Iceland issued a bond and successfully raised 1 billion euros. "Things are looking up," says the Left-Green politician, whose party has been a junior partner of the ruling Social Democratic Alliance since the 2009 elections.

"Unlike Ireland or Greece, Reykjavik decided not to rescue the three big banks in 2008," says Sigfusson. "That wasn't a wise, free decision; its hands were tied, the liabilities were 10 times the GPD. We never could have paid that."

After passing an emergency law, the three banks were morphed into a business bank and a "bad bank." The government took majority shares in two banks and a minority stake in another. It is presently in legal disputes with the UK and the Netherlands, with both countries seeking repayment of deposits made in the old banks by their citizens, individual account holders and big investors alike. Iceland only wants to repay individual depositors, and the matter is now before an international court.

Arnbjörnsson is hardly alone in pining for the euro. His union represents 100,000 workers in the public and private sectors, which is about a third of Iceland's entire population.

Recently, though, he's been having some doubts. In two referenda, Icelandic citizens voted against compensating the British and the Dutch, despite Iceland's legal obligations. "Imagine what would happen if, as members of the EU, we had to vote on paying for the Greeks," says Arnbjörnsson.

Read the original article in German

Photo - Neate Photos

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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