Iceland and Greece were both seriously affected by the Global Crisis, yet their experiences with the implemented IMF programmes have been quite different. In Iceland the programme has been a success, whereas the one in Greece has been a failure. This column explains why this happened. First, Iceland’s external debt was de jure private, while Greece’s external debt was sovereign debt. Second, Iceland has its own currency, making it easy to create a current account surplus through a lower exchange rate. Finally, the government of Iceland took full ownership of the IMF programme, which was not the case in Greece.
Margarita Katsimi, Gylfi Zoega, Thursday, November 19, 2015 - 00:00
Jon Danielsson, Thursday, August 13, 2015 - 00:00
The Greek and the Icelandic crisis have much in common, not the least the heavy pressure from foreign countries and the hectoring from their public officials. In Iceland and in Greece this was counterproductive, hardening the opposition to any settlement. The will to reform needs to come from within, and the sooner the Troika realizes this, the easier it will be to deal with the Greek situation.
Stephen Kinsella, Hamid Raza, Gylfi Zoega, Saturday, July 4, 2015 - 00:00
Iceland and Ireland were both rocked by the fallout of the Global Crisis. This column argues that differences in currency arrangements affected the mechanisms of the boom and the collapse. Iceland’s banks collapsed because they did not have a lender of last resort in euros. Ireland did. But Iceland’s collapse and ensuing capital controls shifted the burden of debt restructuring onto foreign creditors to a much greater extent than in Ireland.
Thorvaldur Gylfason, Thursday, April 16, 2015 - 00:00
Friðrik Már Baldursson, Richard Portes, Monday, January 6, 2014 - 00:00
In 2008, Icelandic banks were too big to fail and too big to save. The government’s rescue attempts had devastating systemic consequences in Iceland since – as it turned out – they were too big for the state to rescue. This column discusses research that shows how this was a classic case of banks gambling for resurrection.
Friðrik Már Baldursson, Richard Portes, Tuesday, November 12, 2013 - 00:00
Iceland’s 2008 capital controls are still in place to prevent outflows of domestic holdings in failed cross-border banks. However, it is important for the country’s future economic prosperity to lift the capital controls without endangering financial stability. This column discusses the risks of capital controls and gives policy recommendations for cases of the three former major Icelandic banks.
Jon Danielsson, Tuesday, May 21, 2013 - 00:00
Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked against it. The new government comprises the same parties that were originally responsible for the Crisis. What’s going on? This column argues that this switch is, in fact, logical given the outgoing government’s mishandling of the economy and their deference towards foreign creditors.
Anne Sibert, Tuesday, April 2, 2013 - 00:00
Depositors in Eurozone banks are facing a steep learning curve on just exactly what deposit insurance means. This column points out that the precedents set in Cyprus and Iceland show that deposit insurance is only a legal commitment for small bank failures. In systemic crises, these are more political than legal commitments, so the solvency of the insuring government matters. A Eurozone-wide deposit-insurance scheme would change this.
This reposted column corrects an error, due to the editor, that was in the first posting.
Jon Danielsson, Thursday, March 28, 2013 - 00:00
Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment. We can only hope the authorities that created the chaos in the first place realise that temporary really needs to mean temporary.
Thorvaldur Gylfason, Thursday, November 1, 2012 - 00:00
Iceland is in the middle of a major constitutional overhaul. This column looks at the unorthodox use of a referendum in drafting the constitution and argues that this democratic element could lead to its long-term success.
Thorvaldur Gylfason, Wednesday, April 11, 2012 - 00:00
Most economists would agree that the global financial and economic crisis was at least partly caused by a failure in the regulation of the financial sector. While regulatory reform is now being debated throughout the world, critics argue that it is only a matter of time before any new regulations are removed by powerful interest groups. This column asks whether prompt corrective action belongs in constitutions.
Jon Danielsson, Ragnar Arnason, Monday, November 14, 2011 - 00:00
The IMF has emerged from the global crisis bigger and more powerful. But this column argues that the capital controls it required Iceland to adopt in 2008 are not of the soft and cuddly modern type that slow hot money flows. Instead they are akin to the draconian controls common in the 1950s. They violate the civil rights of Icelanders and significantly hamper economic growth.
Friðrik Már Baldursson, Tuesday, November 8, 2011 - 00:00
During the global crisis, Iceland was hit by the biggest banking crisis any country has ever suffered. This column reviews the role of the IMF in Iceland’s recovery. It argues that the IMF programme was not perfectly designed but successful. Iceland re-entered capital markets less than three years after the crisis.
Jon Danielsson, Thursday, October 27, 2011 - 00:00
According to the IMF, Iceland has graduated from its Fund-supported programme with unqualified success. This column begs to differ.
Jon Danielsson, Wednesday, October 26, 2011 - 00:00
Much of macroeconomic policymaking is trial and error. This column discusses calamitous error on the part of Iceland’s policymakers, in the hope that others can at least try something else.
Thorvaldur Gylfason, Tuesday, October 11, 2011 - 00:00
As economic protests continue throughout Europe, many wonder whether such efforts will be in vain. This column explores what happened in Iceland, where a “pots-and-pans” revolution in response to the devastating financial crisis gave rise to demands for a new constitution.
Thorvaldur Gylfason, Wednesday, June 1, 2011 - 00:00
The global crisis has brought many countries to their knees, none more so than the small island of Iceland whose losses amount to seven times its GDP. Yet while Iceland’s recovery has in many ways been remarkable, this column argues that the country’s capital controls stand in the way of further progress.
Gylfi Zoega, Jon Danielsson, Wednesday, April 27, 2011 - 00:00
Icelanders have voted against providing a government guarantee for claims made by the UK and the Dutch governments against Iceland’s deposit insurance fund. This column argues that the heated debates surrounding the referendum may provide a glimpse into the challenges that lie ahead for European policymakers as they attempt to allocate losses suffered by banks between the taxpayers of different countries.
Friðrik Már Baldursson, Monday, January 10, 2011 - 00:00
Is the Icesave dispute between Iceland on one side and the Netherlands and the UK on the other becoming a real-life version of Groundhog Day – where we are trapped in the same day that repeats for all eternity? This column discusses what can be done to return us to normality.
Anne Sibert, Tuesday, May 18, 2010 - 00:00
Investigation of Iceland's meltdown has revealed dodgy behaviours ranging from neglect to criminal fraud. This column describes how Icelandic banks issued “love letters” to each other – swapping their debt securities and using the other bank’s debt as collateral. This ruse ensnared not just the Icelandic Central Bank, but also the ECB – a fact that has only recently come to light. The ECB's lack of transparency on this is a serious problem.