Why Greece Should Emulate Iceland 

By Shlomo Maital  

 

    Writing in the Wall St. Journal (May 19-20/2012, page one), Charles Forelle enlightens us about Iceland’s remarkable recovery. All the world’s media covered Iceland’s disastrous crash, in 2008.  Very few are covering its remarkable recovery.  Here is what Iceland did, after its banks crashed:

* devalued its currency by half.  That made imports very expensive, true, and brought inflation,  but it turned Iceland’s trade deficit into a surplus and made its goods (mainly fish) very competitive in world markets.

* Iceland let its banks fail. It did not bail them out. That made the British furious, because they bore some of the losses.  But unlike Ireland, it did not saddle a relative handful of Icelandic taxpayers with burdensome debts for the rest of their lives.

* Iceland imposed strict capital controls to prevent flight of capital.  Of course, the financial services industry screamed bloody murder.  But it avoided the disastrous flight of money out of Iceland that Spain, Italy, Greece, Ireland and Portugal are experiencing.

* Iceland avoided austerity, and instead, increased social welfare payments to its poorest citizens.

   Iceland has only 320,000 citizens. Some say its tiny size make it irrelevant as a case study, or ‘experiment’.  This is not true. It doesn’t matter what its size is.  Iceland avoided austerity and did the opposite. It avoided bailing out banks and assuming huge debts.  Job creation is huge.

      Is anyone listening?  Hello, Angela?  IMF?  Economists?  Anyone? 

 

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