Iceland
Bara Kristinsdottir for The New York Times
Updated: April 24, 2012
Iceland is a small but rugged country far from anywhere that suffered from financial wreckage as severely as any in the developed world after Iceland’soverstretched banks failed in 2008. In a matter of weeks after the banks’ collapse, the unemployment rate jumped to 10 percent, house prices fell, the currency plunged and inflation surged.
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Iceland has managed to recover since the 2008 crisis, helped by its traditional tourism and fishing industries. Some economists have argued that the collapse of its banks forced the country to deal with its problems faster and aided a swifter recovery.
READ MORE:http://topics.nytimes.com/top/
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30 May 2012
By Dan Hind
London, United Kingdom - This is a tale of two countries. One of them, Iceland, has a population of around 320,000 people. That's about as many people as live in Lubbock, Texas. The other, the Republic of Ireland, is a fair bit bigger, with a population of 4.6 million. That's about as many as live in South Carolina.
In the years before 2008, both countries had been hosts to unsustainable real estate and consumer booms. And in both countries a lightly regulated financial sector ran out of control. Iceland's big three banks - Glitnir, Kaupthing and Landsbanki - had lent out more than US $200 billion, eleven times the country's GDP. Ireland's banks were holding assets of around seven times GDP on their books. Much of the money had been lent abroad.
"People in Iceland recognised that something had gone badly wrong with the country's political system."
When the financial crisis hit in the last months of 2008 the two countries r eacted very differently. Iceland's former prime minister, Davio Oddsson, explained that the recently privatised banks had been 'a little heedless' and the state wasn't going to bail them out. Domestic deposits were protected but the government refused to take responsibility for vast bulk of the losses. In Ireland, on the other hand, the government transformed a banking crisis into a sovereign debt crisis. Politicians decided that the banks were too big to fail and spared no expense in their efforts to save them.
People in Iceland recognised that something had gone badly wrong with the country's political system. They responded by drafting a new constitution and in May of this year they tried and convicted another former prime minister, Geir Haarde, for negligence. It all seems roughly proportionate to the scale of the crisis. But in Ireland, so far at least, there has been no serious reckoning for the political and economic establishment. One centre-right party, Fianna Gael, has replaced another, Fianna Fail, in government. The personnel have changed, but not the policies.
On Thursday the Irish will decide in a referendum whether to ratify the European Fiscal Compact, an EU treaty that forbids governments from running budget deficits. The treaty is intended to lock national governments into a continent-wide programme of public sector austerity. Even the British government, with its appetite for public spending cuts, has refused to sign up. Intent on strangling the UK economy it may be, it is determined to do so at its own pace.
'What the bankers want'
Last year the Irish government had to borrow more than 10 per cent of the money it spent. The economy is now in recession. There is no way that it can balance its budget any time soon. But acceptance of the compact will mark another step away from the path chosen by Iceland, where the needs of the global financial sector have, to some extent at least, been subordinated to those of voters.
"The bank's losses can then be paid off through cuts in public spending and new forms of privatisation. Though it makes little sense... it has one great advantage... it is what the bankers want."
At the moment the political class in much of Europe is trying to rescue the financial sector by shifting the costs of the banking collapse onto national balance sheets. The banks' losses can then be paid off through cuts in public spending and new forms of privatisation. Though it makes little sense in strictly economic terms it has one great advantage, from the point of view of the politicians. It is what the bankers want.
In the scramble to balance budgets in the short term, states will sell or lease assets to private companies that will then charge fees for what were once public goods. The same people who made fortunes from the expansion of credit will make even more money from turning public property and nationalised utilities into corporate revenue streams. This doesn't have anything to do with patient investment in new and more productive industries. It doesn't even have the breathless elan of speculation. It is rent seeking of the most blatant and pedestrian kind.
There's no easy way to deal with a burst credit bubble. Iceland also suffered a severe recession. It too has had to cut public expenditure. But there at least the country has had a serious debate about what happened - about what its politicians allowed to happen - in the run-up to the banking collapse. The social order responsible has been held to account and the country's economy appears to be recovering in a way that is restoring the living standards of the people who live there.
I said at the beginning that this was a tale of two countries. But the real comparison isn't between Iceland and Ireland. It is between Iceland and the European Union as a whole. At the moment most European governments are intent on policies that sacrifice the interests of the many to the preferences of the few. It shouldn't surprise us.
It is, after all, the same formula they applied in the prequel. If this is to change then the five hundred million citizens of the European Union will have to learn some lessons from the 320,000 inhabitants of Iceland. If they don't they will learn what the end of mass prosperity feels like instead.
In the mean time I hope the Irish reject the Fiscal Compact on Thursday, for their sake, for Greece's sake, and for Europe's sake.
Dan Hind is the author of two books, The Threat to Reason and The Return of the Public. His pamphletCommon Sense: Occupation, Assembly, and the Future of Liberty, was published as an e-book in March. He is a member of the Tax Justice Network.
Follow him on Twitter: @DanHind
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.
SOURCE:
http://www.aljazeera.com/
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American Free Press
ICELAND CONTINUES ECONOMIC REJUVENATION BY PURGING FINANCIAL PARASITES
MAY 21, 2012By Pete Papaherakles
Iceland is showing the world what real independence from the bankers means. The Nordic island has become the first country to criminally charge a world leader as a result of the 2008 economic crisis. Former Prime Minister Geir Haarde, 73, was found guilty of “failing to adequately inform other Icelandic officials of events that led up to the 2008 financial crisis” according to an April 23 New York Times article.
As part of Haarde’s final verdict, two of the original six charges were dropped and the other three were cleared. These included “gross neglect of duty” and “ failure to reduce the size of the banking system,” charges that were more serious and could have put him behind bars for years.
Haarde, who served as Iceland’s prime minister from June 2006 to February 2009, will not actually have to serve any jail time but the trial was indicative of Iceland’s re-establishment of its sovereignty after defaulting on the bankers. As many as 90 bankers and politicians are expected to be brought to trial this year for crimes related to the targeted debt crisis Iceland faced.
Iceland was the only European country that dared to default on the bankers. In February 2011 Iceland’s President Olafur R. Grimsson refused to sign a $5B bailout bill and told the bankers he was going to put the bill to a referendum. Although 44 of the 63 members of Parliament had passed the bill, Grimsson said he was responding to a popular demand for a plebiscite after more than 42K of Iceland’s 318K inhabitants signed a petition asking him to block it.
Icelanders absorbed some of the costs itself but forced foreign investors to take the biggest hit. Not deterred by horror stories about an “unthinkable economic demise” that have prevented countries like Greece and Portugal from defaulting, Iceland has proved that default was the best thing it could have done. As a result, not only has the economy not collapsed since last year, but its gross domestic product is expected to increase by 2.6% this year. Much of that growth is based on increased production, mainly in tourism and the fishing industry. In contrast, most other European economies are either stagnant or in decline. Even the Times article admitted that many economists say Iceland’s recovery was aided by the collapse of the banks.
Iceland’s recovery is a shining example for countries like Greece, Ireland and Spain to follow. History has proven that countries experience growth once they get out from under the parasitic burden of debt to the bankers. National Socialist Germany from 1933 – 39 is a perfect example.
Real wealth is measured in terms of growth in agriculture, manufacturing and services. Greece and Spain have more than half of their highly energetic youth unemployed, producing nothing. In the U.S. 55K factories have shut down in the last decade.
Iceland has shown that with regained sovereignty comes justice and dignity. Corrupt politicians and bankers can be brought to trial.
Further asserting its independence, Iceland was the first country, last fall, to recognize Palestine as an independent nation, a move no country under the yoke of the international bankers has had the guts to do.
Peter Papaherakles, a U.S. citizen since 1986, was born in Greece. He is AFP’s outreach director. If you would like to see AFP speakers at your rally, contact Pete at 202-544-5977.
SOURCE:http://americanfreepress.net/?
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DEALBOOK
Ex-Prime Minister of Iceland Convicted on Charge Related to Financial Crisis
APRIL 23, 2012BY JULIA WERDIGIER
Ex Prime Minister Geir H. Haarde
LONDON Iceland’s former prime minister, Geir H. Haarde, was found guilty of failing to keep his cabinet informed of major developments during the 2008 financial crisis, but was cleared of three more serious charges of negligence on Monday.
Mr. Haarde was acquitted of three charges that were linked to his management during Iceland’s economic collapse in 2008, which could have resulted in a jail sentence. A Reykjavik court ruled that Mr. Haarde would not receive any punishment on the one guilty count, and that his legal expenses would be covered.
READ MORE:http://dealbook.nytimes.com/
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DEALBOOK
Iceland Indicts Ex-Executives Of Failed Bank
By JULIA WERDIGIER
Published: February 23, 2012
The former chief executive and former chairman of the failed Icelandic lender Kaupthing Bank were indicted on Wednesday on charges of fraud and market manipulation.Hreidar Mar Sigurdsson, the bank's former chief executive, and Sigurdur Einarsson, the former chairman, are expected to stand trial at the beginning of March in Iceland, their lawyers said. The court hearings could last for several months. Both men have pleaded not guilty to the charges.
READ MORE:http://query.nytimes.com/gst/
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An Update on the Iceland Economic RecoveryOn January 17, 2012, in Europe, by Tim
They’ve yet to write the final chapter on how the path taken by Iceland in the wake of the financial crisis (i.e., letting its banks fail and allowing its currency to plunge while consumer prices soared, all of which seems to have led to a much swifter recovery) compares to the path chosen by the rest of the world (i.e. printing money, propping up the banks, and lots of can-kicking), but this Washington Post story brings readers up to date.
- Iceland’s journey from financial ruin to fledgling recovery is a case study in roads not taken and choices not made by other countries faced with calamity in recent years.
- By the time the United States and Europe began to wrestle with the fallout of the global financial crisis in 2008, this tiny island nation was experiencing full-fledged meltdown. Its bloated banks failed. Its currency collapsed. The prime minister invoked God’s help, and protesters filled the streets.
- Iceland did what the United States chose not to do allow its biggest banks to fail and force foreign creditors to take a hike. It did what troubled European nations saddled with massive debts and tethered by the euro cannot do allow its currency to remain weak, causing inflation but making its exports more desirable and its prices more attractive to tourists.
- Three years later, the unemployment rate has fallen. Tourism has increased. The economy is growing. The government successfully raised money from investors in the summer for the first time since the crisis.
- It’s tempting to conclude that this country of 318,000 people simply handled the crisis more adeptly than others, like a pick-your-own-ending book in which Icelanders chose correctly. There is a sliver of truth in that, but the full story is more complicated.
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If nothing else, it should be interesting to see how Iceland is doing three, five, or ten years from now as compared to other Western nations. According to the latest data from The Economist, the Iceland economy has been booming lately, though, for some reason, projections for the New Year are very U.S.-like.
READ MORE:http://timiacono.com/index.
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OP-ED COLUMNIST
The Path Not Taken
By PAUL KRUGMAN
Published: October 27, 2011
REYKJAVIK, Iceland...
But it’s worth stepping back to look at the larger picture, namely the abject failure of an economic doctrine a doctrine that has inflicted huge damage both in Europe and in the United States.
The doctrine in question amounts to the assertion that, in the aftermath of a financial crisis, banks must be bailed out but the general public must pay the price. So a crisis brought on by deregulation becomes a reason to move even further to the right; a time of mass unemployment, instead of spurring public efforts to create jobs, becomes an era of austerity, in which government spending and social programs are slashed.
This doctrine was sold both with claims that there was no alternative that both bailouts and spending cuts were necessary to satisfy financial markets and with claims that fiscal austerity would actually create jobs. The idea was that spending cuts would make consumers and businesses more confident. And this confidence would supposedly stimulate private spending, more than offsetting the depressing effects of government cutbacks.
...
But a funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.
So how’s it going? Iceland hasn’t avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. “Things could have been a lot worse” may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.
And there’s a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn’t and doesn’t have to be this way.
READ MORE:http://www.nytimes.com/2011/
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SOURCE:http://www.tradingeconomics.
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