Early recovery predicted for Iceland

ICELAND COULD be one of the first countries to emerge from the economic crisis, the country’s former prime minister has predicted.

Last year Iceland was bailed out by an IMF-led group after its banking system disintegrated and the country effectively became bankrupt.

However, speaking at the Institute of International and European Affairs yesterday, Geir Haarde said there were “many silver linings” to Iceland’s situation.

“First of all, it was one of the first countries to get hurt,” said Mr Haarde. Therefore it may be one of the first countries to recover.

Although Iceland’s gross domestic product (GDP) is expected to contract by 10 per cent this year, some forecasts suggest the country could return to economic growth next year.

Mr Haarde, who resigned from politics in February for health reasons, said the country still had a profitable, sustainable fishing industry; an abundance of cheap, renewable energy sources; and a rapidly-growing tourism industry.

“Most importantly of all, we have a relatively young and well-educated population who can adapt. I’m optimistic with respect to my own country. I think we will pull ourselves through. I’m not sure that everybody else will.”

He also said he doubted that Iceland’s problems would not have happened had it been a member of the EU, and pointed to countries such as Latvia and Ireland. “You’ve had a lot of difficulties in spite of being a member of the EU and the euro.”

He added that the IMF has not imposed conditions that were unfair nor made demands that Iceland could not meet.

The issue of whether the country should now apply to join the EU was “a pretty open question at the moment”.

Mr Haarde was particularly harsh in his criticism of the actions by the British government which invoked anti-terrorism legislation to freeze the assets of failing Icelandic banks. “The damage was enormous,” he said.

He also said current EU financial regulations on deposit insurance schemes for cross-border banking needed to be revised. “These rules looked quite good on paper, but were seriously flawed and in some cases dangerous.”