Iceland tries bank-crisis PM Haarde

Iceland's prime minister at the time of its 2008 banking crash pleaded not guilty to charges of negligence at the start of a historic trial yesterday.

Former premier Geir Haarde was appearing at the first sitting of a special court first set up in 1905 to try government ministers. Parliament voted last year to bring the negligence charges against Haarde.

He told the court of 15 judges: "I declare myself innocent of all charges and will do my utmost to prove my innocence." If found guilty, he faces up to two years in prison and a fine, but could also get probation.

After the hearing, he said: "This whole affair is a farce, solely instigated by three members of parliament who have succeeded in holding the first political trial in the country's history."

The charges include gross negligence for failing to take proper measures to prepare for an impending financial crash, failing to rein in banks and failing to keep his own ministers informed of the size of the bank system relative to the economy.

The defence spent much of the 30-minute session arguing about the right of eight of the judges to hear the trial. Iceland's three main banks collapsed under their debts in 2008 during the global financial crisis. Haarde was PM from 2006 to 2009 when they were still expanding fast.

Iceland had to take a bailout from the IMF and Nordic lenders after the crisis, and popular discontent and protests led to the fall of Haarde's government.

Though stability has returned, the country is still struggling with the legacy of the crisis.

Unemployment in Iceland rose from 2 per cent in 2007 to 7.8 per cent this year.