Iceland, which demanded its leaders & bankers answer for their crimes, is now reaping the benefits

[stockholmer]

http://www.bloomberg.com/news/2012-02-20/icelandic-anger-brings-record-debt-relief-in-best-crisis-recovery-story.html

Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger. Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association. http://www.sff.is/

“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.” The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.

The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses. “The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”

Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said. Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates. Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”


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[CaliforniaPeggy]

1. I wish more countries had followed Iceland's example.

Why didn't they?

[Justice wanted]

2. OH if only America can take a lesson from Iceland.

[DirkGently]

3. Iceland followed us over the cliff, but wasn't stupid enough to keep digging when they hit bottom.

We, of course, were.

[Magoo48]

4. Small country, big balls.....big country, no balls.

The pols here in the USA, with few exceptions, sold their junk to the one percent long ago.

[MannyGoldstein]

5. Total fucking lie

I've learned from the good third-wayers on DU that default=catastrophe.

[Neue Regel]

6. Iceland went about it all wrong

What they should have done was hand over a couple of trillion dollars to the bankers who caused the crash in the first place.

[Lydia Leftcoast]

7. The moral of this story: Whatever the banksters tell you to do, do the opposite

In the 1997 Asian Currency Crisis, the conventional wisdom was that the East Asian countries needed to enter austerity and deregulate their financial systems more.

Malaysia, whose partly Islamic heritage made it leery of Western-style banking in the first place, said, "Oh yeah?" and immediately put tight controls on trade in its currency, the ringgit. It also avoided austerity measures.

The banksters predicted disaster.

Guess which country emerged from the crisis first.

Just two years ago, the righties were touting Ireland and Latvia as shining examples of the benefits of deregulation and low taxes.

You don't hear that anymore, now that both countries' economies have crashed through the floor.

Instead, you hear the righties saying that the trouble with Europe is "too much socialism," and guess what their remedies are: deregulation and low taxes.

[Quantess]

8. Good for Iceland!