Saturday, February 18, 2012

The news from Iceland is good

Unlike the news from Greece, Italy and a host of other countries. In Iceland, as Ambrose Evans-Pritchard says, things are looking up, which probably means that they are even less likely to want to get on this sinking ship:
Fitch has upgraded the country to investment grade BBB – with stable outlook, expecting government debt to peak at 100pc of GDP.
The OECD's latest forecast said growth will be 2.4pc this year, after 2.9pc in 2011. Unemployment will fall from 7pc last year to 6.1pc this year and then 5.3pc in 2013.
The current account deficit was 11.2pc in 2010. It will shrink to 3.4pc this year, and will be almost disappear next year.
The strategy of devaluation behind capital controls has rescued the economy. (Yes, I know there is a dispute about exchange controls, but that is a detail.) The country has held its Nordic welfare together and preserved social cohesion. It is slowly prospering again, though private debt weighs heavy.
Nobody is forcing the elected government out of office or appointing technocrats as prime minister. The Althingi sits untrammeled in its island glory, the oldest parliament in the world (930 AD).
Of course, there is the minor detail that the Althingi did not voluntarily give up its right to sit untrammelled in its island glory.


  1. In July 2009 it looked very much like the Althingi was volunteering to give up its right to sit untrammelled in its island glory when the 63-seat parliament backed the proposal to start membership talks with the EU by 33 votes to 28, with two abstentions.

    It's the same story, even that far north: the politicians want something that the populace does not.

  2. In this case the politicians or most of them have returned to their reasonably good sense. Or so it would appear. Oh and the people vote those politicians in, I am afraid.

  3. Iceland has enough exploitable resources (fish, cheap but not easily transportable energy, spectacular scenery for tourists to look at) to provide the small number of people there with a rich country lifestyle. For a few years the country went collectively nuts on other people's credit, but the way out of that is to default, continue selling cod for cash, and recognise that you are going to have to fund any development with domestic savings for a while. Also, FOR THE SAKE OF ALMIGHTY GOD DO NOT JOIN THE COMMON FISHERIES POLICY.

  4. The CFP is one of the biggest reasons for both Iceland and Norway's consistent refusal to join the EU. And who can blame them?