'Ireland much more resilient than us'


ICELAND:Two years on from its banking crisis, Iceland can see some light at the end of the tunnel

ICELANDIC POLITICIAN Helgi Hjörvar faced downcast Irish politicians gathered yesterday at the British-Irish parliamentary body meeting in the Isle of Man and offered some hope, as they reacted to every latest snippet of gossip from Dublin.

The joke about Ireland and Iceland, he said, had put the difference between the two countries as six months and one letter: “Ireland turned out to be much more resilient than us and its crisis is much less than ours.”

Two years on in Iceland, inflation and interest rates are down, unemployment stands at 7.3 per cent, while the country’s trade balance is back in the black; and the economy will start to grow next year. “There are opportunities in crisis to reset your values, to rearrange how you organise things in your society, to do things better,” said Mr Hjörvar, president of the Nordic Council and chairman of the Icelandic parliament’s tax and economy committee.

Since the crisis, Iceland’s government has changed; parliamentary investigations have excoriated those responsible for the banking crisis, while a 25-strong body is to draft a new constitution for the country of 350,000 people.

So far, relations with the International Monetary Fund have gone well, he believed: “There are different views, but, generally, I think they have had an understanding of the situation that they were stepping into.

“We didn’t take down public spending in 2009, even though we were spending heavily. The reason we did not do so was not to make the crisis even deeper than it otherwise would have,” he said, adding that Iceland plans to be back in surplus in three years.

Taxes have been raised to 2003 rates.

“The new taxes presented are actually old taxes that were taken away when we thought we had all the money in the world. Now they are just back in place again. We lived with it before and we should be able to live with it again.”

Feeling alone and exposed immediately after the crisis erupted, Iceland applied to join the European Union, though the Greek experience has given some pause for thought. “We didn’t have a currency that was sustainable, it was too small and all sorts of speculators were playing with it and taking heaps of money out of our economy by doing so,” said Mr Hjörvar. “But now the problems that have occurred in Greece have created some scepticism among the public about whether the euro was the solution and now your problems [in Ireland] will add to that,” he told The Irish Times.

Repossessions are barred by law, while banks that do not want “to flood the market with auctions” have cut some debts to 110 per cent of a property’s market value: “Thus, there will have to be some write-offs. They realise that it is unrealistic to claim more than people can pay.”