Former Icelandic prime minister Geir Haarde [official profile, in Icelandic] pleaded not guilty Tuesday to charges that he was grossly negligent for failing to stop the nation's banking collapse during the 2008 financial crisis [JURIST news archive]. Haarde vowed that he would prove his innocence [Reuters report] and claimed that the charges were a result of the first political trial in the nation's history. Haarde is facing trial in the Landsdomur, a special court created to try government ministers, after being accused of intentionally or grossly negligently failing to prevent the 2008 Icelandic financial crisis [resolution, in Icelandic]. The Special Investigation Committee (SIC) [official website, in Icelandic], convened in 2008 by Parliament to investigate the collapse of the country's three largest banks, determined that Haarde and former central bank head David Oddsson [official profile, in Icelandic] knew that banks were assuming overseas debt but took no action to prevent or mitigate the effects of the accumulation. Haarde is the first world leader charged [AP report] in relation to the financial crisis, and, if convicted, he could face two years in prison.
Last September, the Icelandic Parliament [official website, in Icelandic] referred charges to the Landsdomur after the SIC released a report claiming that seven Icelandic government officials acted with gross negligence in their management of the country's financial system prior to a 2008 bank collapse. The SIC also found that former minister of finance Arni Mathiessen, then-banking minister Bjorgvin Sigurdsson, former Financial Services Authority [official website] director Jonas Jonsson and central bank officials Eirikur Gundason and Ingimundur Fridriksson failed to take appropriate action when presented with information about the poor state of the country's financial sector. Iceland was hit hard [BBC backgrounder] by the financial crisis that emanated from securities related to the US mortgage market. When Kaupthing, Landsbanki and Glitnir [corporate websites] were taken over by the Icelandic government in 2008, they were holding debt equal to more than 900 percent [AFP report] of Iceland's gross domestic product, causing the country's economy to collapse and the government to rely on loans [IMF materials] from the International Monetary Fund (IMF) [official website] to meet its obligations.