Looking for Lessons in Iceland's Recovery

[marmar]

from Der Spiegel:

In 2008, Iceland experienced one of the most dramatic crashes any country had ever seen. Since then, its recovery has been just as impressive. Are there lessons to be learned? SPIEGEL went to the island nation to find out.

What should one expect from a country in which the sentence, "What an asshole!" is a compliment? Icelanders say "asshole," or "rassgat," when they tousle a child's hair or greet friends, and they mean it to be friendly.

.....(snip).....

What happened in Iceland from 2008 to 2011 is regarded as one of the worst financial crises in history. It seems likely that never before had a country managed to amass such great sums of money per capita, only to lose it again in a short period of time. But Iceland, with a population of just 320,000, has also staged what appears to be the fastest recovery on record. Since 2011, the gross domestic product has been on the rise once again, most recently at 2 percent. What's more, salaries are rising, the national debt is sinking and the government has paid off part of the billions in loans it received in 2008 from the International Monetary Fund ahead of schedule. It's a sign of confidence.

.....(snip).....

It was German money, Jónsson says, that flowed the most freely following the liberalization of Icelandic banks in the 1990s. Still today, Germany is the country's largest creditor, he says. In 2010, German banks had over €20 billion in open claims in Iceland. "Germany has a weakness for Iceland," says Jónsson, who now works as an economics professor in Reykjavik. "Even Wagner borrowed from our legends for his operas," he says. In 2012, the number of German tourists to Iceland, with 65,000 visitors, was in third place behind the US and Great Britain.

Iceland's rapid return to health hinged on a series of measures that Nobel laureate Paul Krugman later referred to as "doing an Iceland." Krugman, an admirer of Iceland's dramatic comeback, has recommended a similar policy cocktail for other nations in crisis. The rules are as follows: Allow your ailing banks to collapse; devalue your currency if you have one of your own; introduce capital controls; and try to avoid paying back foreign debts. .....................(more)

The complete piece is at: http://www.spiegel.de/international/europe/financial-recovery-of-iceland-a-case-worth-studying-a-942387.html

[BelgianMadCow]

1. lessons to be learned, indeed

and rather urgently, once might say.

[SummerSnow]

2. Glad they are recovering. Great lesson indeed.