Iceland has the last laugh on financial markets

 

IN LATE 2008, after the collapse of Lehman Brothers in the US, there was a joke going around the international financial markets that the only difference between Ireland and Iceland was one letter and six months.

We scoffed loftily at such a suggestion and thanked our lucky stars for our EU membership. Ireland was nothing like Iceland, we told ourselves.

On Tuesday, Iceland emerged from recession, posting GDP growth of 1.2 per cent between July and September, as it continues its journey along the road to recovery.

On the same day, Brian Lenihan published the first of four hairshirt budgets to effect a €15 billion adjustment in our public finances. Even before this, we’ve already swallowed €14 billion in cuts and increased taxes as we try to get back on our feet.

Living standards in Iceland are back to 2003 levels and retail spending remains weak but the export sector is thriving and the International Monetary Fund – which led a bailout for Iceland two years ago – expects further progress in 2011.

Of course, Iceland was able to devalue its currency and it let its banks fail, much to the annoyance of the governments of Britain and the Netherlands, whose citizens had significant funds on deposits with them.

If only that markets gag were to hold true now. At least then, we’d all have something to look forward to.