“We are not Iceland!”

Indeed. Today sees Iceland(!)’s sovereign debt return to the rim of investible as Fitch upped their rating of Iceland(!)’s debt to BBB- but stable. In other Icelandic news it looks as if a debt forgiveness programme mooted in 2009 is going ahead, their top civil servant in their department of finance is in prison, and, delving into the Icelandic stats a little the nation’s GDP is looking pretty healthy, too.

This OECD background paper gives an overview of the crisis and the Icelandic authority’s response to it.

So: we are not Iceland!

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

93 replies on ““We are not Iceland!””

Also, picking their head of financial regulation from within the ranks of their bankers was probably not a good idea.

Finally, per Dept of Finance practice, the country should be referred to as “Iceland!”

Enda Kenny talks about restoring Ireland’s reputation but when do we see articles like this today from Bloomberg


Which incidentally claims that Icelandic banks have forgiven 13% of GDP in private bank debt which would equate to about €20bn here. And remember Iceland didn’t have an Irish property bubble


@Stephen, that’s true and for more balance, I believe Iceland is still being vigorously pursued to honour its international banking debts (principally to the UK), though I have lost touch with that issue.

@ Stephen

does their GDP data take account (i assume its in US$) of where the ISK would probably trade absent the strict capital controls which are still in effect?

We just dont have politicians of the calibre of Ólafur Ragnar Grímsson 🙁

“Mr. Ólafur Ragnar Grímsson was elected the fifth President of the Republic of Iceland on 29 June 1996. Mr. Grímsson has a Ph.D. degree in Political Science. He was a professor at the University of Iceland, served as Member of Althingi (parliament), was Minister of Finance 1988-1991 and served as chairman of the People’s Alliance Party. Mr. Grímsson was chairman and later International president of the International Association Parliamentarians for Global Action (PGA), in the years 1984-1990 and has sat on the board since. The PGA is an association of over 1,800 parliamentarians in about 80 countries. The association organised the “Six Nations Peace Initiative” 1984-1989, which included amongst others the late premiers Olav Palme of Sweden and Rajiv Ghandi of India. Mr. Grímsson sat on the executive committee of this initiative. He accepted the Indira Gandhi Peace Prize on behalf of the association in 1987 and has himself received international prizes. Mr. Grímsson was a member of the parliamentary assembly of the Council of Europe 1980-1984 and again in 1995. He was chairman of the organising committee of the “Parliamentary Conference of the Council of Europe, North-South: Europe’s Role 1982-1984″. This conference created the basis for the Council of Europe’s work on North-South relations and the foundation of the North-South Centre in Lisbon.

In recent years, Mr. Grímsson has been advisor to Icelandic firms seeking new markets, particularly in Asia and South America.”

The real story in Iceland is how they managed to flush the financial services sector lock it had on their economy; and switchover to data services, gaming, clean energy and currently gain unemployment levels at approx 7.5% in the face of Cassandra’s threatening doom and Armageddon against them.

This is capitalism at work, it cares frig all about the past, just about the present and what it claims to predict in the future, lots want Olafur to run for pres US. Unfortunately, Olafur is a scarce commodity in this world 🙂


@Eoin actually thinking about it, there hasn’t been a discussion of which alternative a policy maker might prefer. Obviously capital controls are no joke, but I wonder if given the choice between Ireland’s set of policies and Iceland’s, with full foresight of the costs and benefits, which people would choose.

@ Stephen Kinsella


Throw in a few years in jail for Seanie @ Co, tell them what to do with PN’s for IBRC, ->I know which way that referendum would go 🙂 Nope, we are not Iceland, where they do like their referenda.

@ Stephen K

well, devaluation + capital controls have probably lead to a destruction of wealth somewhere of the order of 50% or so in terms of purchasing power. So it depends on your financial situation – if you didn’t have any wealth to start with, the Icelandic policy makes sense. If you’re 60 years of age and about to retire, it probably doesn’t.

@ Colm Brazel

Your hero Ólafur Ragnar Grímsson, having been a great booster of the Viking heroes strutting their stuff overeas during the boom, is certainly a nimble chameleon.

What next? A panegyric for Bertie Ahern?

@ All

Country comparisons should be treated with caution; people tend to pick what suits to fit an existing argument and ignore inconvenient facts.

We were in a currency union and there’s no point crying over spilt milk; some would argue there was no advantage from that and all was negative; the development of the financial centre could be attributed to leprechauns etc.

Iceland’s population covers a few suburbs in Dublin; it has its own natural resources – – so the value added of its exports is high; Ireland’s economy is primarily a location for US mncs.

The facts don’t support the argument that devaluation helped Iceland’s exports. The spike in exports happened prior to Oct 2008.

@ Bond 4:19,

Your dirt digging would be better targeted at those who’ve buried the Irish economy eg Central Bank, NTMA, Department of Finance, exhuming those responsible for the mess we’re in.

He wasn’t the only one in Iceland led up the garden path and conned by the banks. Unlike our lot, he’s shown a capacity to learn from mistakes. Apparently, the only thing we learn from mistakes is how to make even bigger mistakes. I believe its FG/LB policy to grow 10000 jobs in the financial services industry presumably on Dutch sandwiches; but looks like Obama will be closing that tax loophole shortly 🙂 Come to think of it, when are we going to hear of the dreaded redundancies in the banks and financial sector that were to come with deleveraging ?

The difference with Olafur is that he didn’t bail out the banks and financial sector and lay its muck on the taxpayers of Iceland and bury them in it as our lot have done 🙁 I’m sure you disagree and its all jobs and growth and prosperity ahead, lol.


tks for link to OECD paper look forward to reading, would have been more illustrative if corresponding graph for Ireland included below the Iceland one, but I’m not complaining 🙂

Iceland’s banks collapsed, but the work out of their assets found that they covered most of their liabilities, unlike in Ireland.

@ MH

“Ireland’s economy is primarily a location for US mncs”

Your point being?

They are global and sell all over the world good things in small packages.

No reason this FDI cannot continue unless Obama closes those tax loopholes, or the Bundestag closes off our CT rates and we’re turned into the Haiti of Europe solely reliant on foreign aid; that is, all except the farming community, who are doing rather well, the rest of you can leave 🙂


I admire Icelandś (collective) intestinal fortitude and like to think that it may have something to do with the fact that around 95% of the population have Danish and Irish genes.

“So: we are not Iceland!”

Yes but we are not Greece, Portugal, Belgium or Italy, etc either.

The simple reality, IMHO, is that if (like Iceland )we went “ballistic” we would probably bring down the whole Euro Zone and by extension most of the EU/EEA along with it. As many of us now realise 15 months after the stitchup (sorry “bailout”) most of Europe is balancing precariously on an economic socio-political tightrope.

Even “the best ” countries have serious imminent socio-economic trouble and are each separately tring to ignore their own internal troubles. Germany is trying to ignore itś pension deficit, Sweden is trying to ignore itś housing bubble, Holland is trying to ignore itś huge levels of personal/private sector debt and peripheral Finland is trying to ignore that itś parliament is veering towards the extreme right.

Right now the only two western countries the Chinese and other large emerging economies seem to be taking seriously are Ireland and the USA. I suppose from the vantage point of distance it is easier to see (and distinguish between)the lunacy going on in Europe than it is for those of us who are in the middle of it.

Unlike Iceland, we cannot ignore the European farce (and the Europeans can not ignore us) so we have have no choice but to deal with the farce.

Irelandś main tragedy is that some remaining dinosaurs in the Irish public service actually cling desperately to the redundant and pathetic belief that many of our European partner states (as well as the ECB and Commission) are run by “sophisticated/cosmopolitan” geniuses instead of increasingly desperate chancers.

We can no longer afford to waste excessive energy trying to “fix” Europe (although we must continue trying within our limits) and we most certainly must not waste no more time time trying to “impress” Europe.

Iceland , unlike Ireland ,can get by even if it occasionally slightly irritates some European states because it is small and will always have some close friends.The rest of Europe will get by regardless of what Iceland does because Europe is not heavily exposed, financially, to Iceland.

So,yes, I (and probably the rest of the world ) agree: “we are not Iceland!” 🙂

The Icelandic currency lost half its value from late 2007 and has never recovered. Icelanders lost half their savings and half their incomes.

If you were a debtor in Iceland you did well. Half your debts wiped out followed by negative equity mortgage forgiveness.

If you were a prudent tenant and saver you didn’t fare so well. Iceland had its winners and losers just as Ireland did.

@BEB @Colm

Excellent point

I was actually thinking of that before I decided to go off on my own separate “rant”. Still admire Icelandś (collective) intestinal fortitude though.:)

re :the tragedy of remaining dinosaurs in the Irish Public Service”

Ironically the senior politicians who have been around the longest eg: Kenny (who although he is not that old is the “father of the Dail), Noonan and Gilmore as well as a few others seem to be actually the ones who see through the “bluff and bluster” of the “sophisticated/cosmopolitan leaders within our European partner states and institutions.

It is a pity some, but by no means all, of our permanet senior Public Servants (who have not deserted their collegues via “Golden Parachutes) would not step out of their cocoons for a while and observe events more objectively. 🙂

@ Colm

“Your dirt digging would be better targeted at those who’ve buried the Irish economy”

this is a thread devoted to Iceland, it seems an apt place to examine how they ended up where they are and who brought them there. Like in Ireland, and indeed everywhere, politicians were big boosters of the boom. They tend to try and forget this after its all collapsed.

@Colm, your wish is my command. Ireland’s Real GDP for both countries in % changes from the previous year, courtesy of Eurostat, table here. http://bit.ly/zCnf17

Ossyian’s point about winners and losers is well made, but in Iceland, I think, there were far more winners than losers domestically, at least judging by the coverage I’ve read of the entire crisis.

Let’s talk hard currency nominal GDP. Life in Iceland is heavily dependent on imports.

Iceland GDP 2007: €15bn, GDP 2011: €10bn
net loss 33%

Ireland GDP 2007: 190bn, GDP 2011: €156bn
net loss: 18%
source: Eurostat/tec00001

Imports have risen at least 70%+ in the interim
Toyota Iceland price list 2007

Toyota Iceland price list 2011

Compare the Toyota pricelists for Ireland and prices have actually fallen
2007 Ireland price list:

faraway fields


tks, looks better with both:-)

Eurostat charts are a bit cumbersome because their graphs only list numeric data, and graphically map only percentage change from last year. The baseline changes below judging by your graph are percentile changes. The f index below stands for forecast, but they must be wearing rose tinted spectacles, even ICB is knocking back its growth forecasts.

Ireland 2007 5.2p, 2008 -3.0p, 2009 -7p, 2010 -0.4p, 2011 1.1f, 2012 1.1f, 2013 2.3f

It would be really cool if the IFSF or Google similar redirects and transfers could be separated out of those figures, but I imagine those figures are locked down under
‘commercial sensitivity’ as well, perhaps it useful to require
all elements of GDP to be publicly declared as to origin, but probably not going to happen.

Your point re NGDP per capita not sure is useful if emigration is whooshing out the population and leaving only a few to operate robots in the multinationals?

Good to see you appreciate the efforts in Iceland to lift debt burden from the population in contrast to Ireland’s dismal record offloading debt burden from its population.

One index to measure one country against another is employment levels. We’re currently at 14.5% if you can believe that low figure twice as bad as Iceland in that regard.

Ossians’s figures above dont show the skewed nature of debt burden distribution across the Irish population. I include unemployment as part of debt burden. It would appear there is an uneven distribution of this burden with unemployment, higher private sector debt at the lower and middle end.

The graphs I would be most curious to see though are the ones plotting the debt obligation totals on an annual basis as a percentage of the tax take under a few base scenarios such as no growth, 3% growth and -3% growth rates as measured in GDP over the next 5 to ten years.

This should be a simple set of figures to use as a rubric to measure the effects of the debt burden going forward over time. Most has been done on this apart from the PN’s but even here no modelling of this debt has been graphed or measured against our tax take. We have the Troika 3% 60% targets but I havn’t a clue eg for 2016 how deficit reductions plus debt repayment obligations will be funded in this nightmare scenario.

It seems these calculations are being left with the Troika to work out, but even here there is no clear identification or modelling of the data available for public consumption.

Its possible the ESRI or the ICB have done the figures and don’t want to upset the population by releasing these. But people should be informed as to the precise debt burden its consequences over the short to medium term even if this alarms those already in negative equity.

Blindfolds for everybody it seems and those ‘technical discussions’ to help the troika extract more debt peonage for its Eurobanks and German balance of payments surplus ponzi scams 🙁

@Colm, the NGDP per capita measure is really important when you remember there are 300,000 of them and 4.58 million of us at last count. We could also go get GNP data to get rid of some of the multinational stuff. What do you mean by ‘debt obligation levels’?

@ Gavin

Is it bad, because it looks a lot worse than GDP, or good because it looks a lot better that it would look if we hadn’t extended and pretended ?

And in Ireland:

-Patrick Neary got a golden handshake
-All his subordinates still employed,one since promoted
-Dep Finance still controlled by the same insiders
-Politicians on very generous pensions
-Trade Unionists and journalists untouched
-Big4,who performed many audits for the FinReg(e.g. Basle): untouched

Bar some very welcome new blood in the CB: We got no meaningful reform. And the politicians remain in vote buying mode:

Bertie concentrated “his” largesse on the low to medium paid:
1) Large Sw increases,incl both Dole,various allowances and rent supplement
2) large PS pay increases,which as per the various Esri reports,opened a massive say differential vs the private sector in the low-med paid grades

and the 2 vote buying bribes above remain untouchable,part of our (now permanent?) Budget current deficit.

Oh ,in case anyone is feeling optimistic …the Govt’s chief economic adviser is an ex quangocrat (ex Forfás),a party hack who made a fool of himself on this blog with comments on his shoddily conceived 4.5 page “solution” to Ireland’s banking crisis.


Spiegel Interview with Kenneth Rogoff

In an interview with SPIEGEL, Harvard economist Kenneth Rogoff, 58, says it was a mistake to bring all the southern European countries into the common currency. He also argues that Greece should be granted a “sabbatical” from the euro and that a United States of Europe may take shape far sooner than many believe.


Thought provoking.


“We just dont have politicians of the calibre of Ólafur Ragnar Grímsson”

I bet we pay ours more though to make up for it……

@David O’Donnell
re Rogoff article:

Not impressed by that article.
The solution appears to be that all countries should all become like Germany in terms of industry and export more to the BRICS.
Perhaps he should ask if the BRICS intend to stand still while all this is going on. China can send rockets into space. How many people seriously believe that China can only produce low tech products. Germany’s position at the top of the technology tree will come under severe pressure.

His scenario of a US of Europe is so far removed from reality as to be unthinkable. There is nothing ‘United’ about the way the peripheries, particularly Greece, are being put on the rack. So much damage has been done and trust lost that in another era Europe would now be at war.

It was not just the Bourbons who ‘have learned nothing and forgotten nothing’.

Following the privatisation of two of the main banks in 2003, the finance sector took off with the help of easy access to wholesale funding that eventually saw assets grow to ten times GDP.

However, the rest of the economy was relatively closed with exports at 35% of GDP in 2007 – – less than Germany’s.

Household debt over 200% of disposable income and an unemploynmt problem that will persisit for a decade according to the OECD, are similar to Ireland’s challenges in these araes but the directfiscal cost of the crisis to the state at 20%, before allowing for Icesave, is of course much lower.

Another similarity with Ireland is in being able to take advanatge of rulebreaking such as the current massive overfishing by Iceland.

@ Stephen

the system seems a bit TOO broad based, no? I mean, i don’t see any reference to ability to pay, whether you should bear some of the responsibility for taking on the debt in the first place (ie the foreign currency loans which people took on cos they didnt want to pay high ISK interest rates). This just seems to be an entire society saying “we aint paying”, which will impact on the long term availability and pricing of credit for a long time to come. The Icelanders probably didn’t have a choice in the matter (the bank debts were 7x GDP, and most of it non-ISK), but that doesn’t meam everyone else should follow their example.

What do people feel about Iceland’s approach to debt forgiveness?

Debts are not sins, they cannot be ‘forgiven’, merely transferred. The mortgage debt and personal debts in Iceland were paid by debasing the savings, welfare payments and public salaries of all Icelanders. The extent of your losses were proportional to the extent that you had trusted the Icelandic currency as a store of value and the extent to which your income was local rather than foreign earned.

Savers were punished for their virtue. Borrowers were rewarded for their recklessness.

Roger Boyes, award winning journalist, has a good can opener of a book, ‘Meltdown Iceland’, where the leading players in the saga are forensically examined. We get the inside track on the oligarchs, the three central bankers, ‘Hear No Evil, See no Evil, Say no Evil’ which is very much the mantra of our current LB/FG. In Ireland they managed to keep and continue to keep everything stealthily under the radar. The oligarchs are safely hidden away in NAMA protected by commercial sensitivity, only now and then. For example, namawinelake this morning has a glimpse at the court proceedings between Treasury Holdings and Quinlan, http://namawinelake.wordpress.com/. Oddson, central bank governor, p115, longest serving prime minister turned chairman of central bank governors shows the meshing of politics/banks “Oddson had made plain he was unhappy about the way that bank privatization-his privatization-was turning the financial institutions into cash machines for the tycoons, and how the banks were becoming self-rewarding high risk-takers. The carry trade, “Hot money can flood into a country and create the illusion of wealth, boost the local currency. And it can leave at the first sign of panic. It was a shaky basis on which to build a banking system’. The general public were brought into the ponzi scam by encouraging to borrow in foreign currencies eg yen and profit from the rising value of the kroner as borrowed money inflated the kroner.

@ Bond, Liars Poker here by Michael Lewis story of a Wall Street bond trader you should like, a story of those times and the lack of regulation.


In Tir na NÓg everything has been tidily hidden away from prying eyes 🙂

Pity we have no Roger Boyes exposé of the shenanigans whose leading lights are still running the show.


Iceland generates its electricity and home heating in krona (hydroelectric and thermal) so oil imports relate only to transport etc.

Imported inflation would have been a hell of a lot less than in a country which relies on oil for power and heat (as we do) which is part of why the devaluation was less painful than it would otherwise have been.

Comparing sovereign apples with pears…

@Stephen 9:15 Feb 20

Sorry for delayed reply,

Re “We could also go get GNP data to get rid of some of the multinational stuff. What do you mean by ‘debt obligation levels’? ”

Yes GNP data separated from GDP gives some of the multinational stuff. But still leaves multinational transfer pricing stuff mixed in with locally produced eg pharma products, how would you get around that? Certainly GDP has become a false mantra to disguise collapse of the real economy in GNP.

Debt obligations is my layperson phraseology, sorry if its confusing there. The point I’m trying to get at is the discovery of categories of data related to

1. Foreign Borrowings related to funding our current deficit

2. Annual say over medium term 5-10yr cost of closing our budget deficit in terms of reduced spending available for the public sector. For example, taking the 3% budget deficit to GDP target of 60% http://en.wikipedia.org/wiki/Euro_convergence_criteria

3. I know that our budget deficit is to be screwed and skewed in 2 above. But ideally, it would be great to separate out full repayments including IBRC repayments that profile the full cost of bailing out the banks to the budget as a separate item on an annual basis over the next ten years.

To simplify the above, is it possible to guesstimate our budgetary intake over the medium term and set against it what needs to be taken away to service debt and convergence criteria movement above?

Annual budget spend on a department by department basis would also be useful to dramatise how our economy is being hoovered of resources.

@ Colm

Liars Poker is a good read, tad sensationalistic at times, but fun nonetheless. The Big Short is a far superior scribble from Lewis.

Meltdown Iceland started off well, but got very dull towards the end, though in fairness the early stuff is actually the more interesting “big picture” view, how a country that had damn near perfected fishing decided in the 1970’s that there was far more interesting things to do in the world like corporate finance, banking, high street retail, etc.

Can you stop calling Ireland Tir Na nOg btw, its getting a tad repetitive and less funny each time…

“Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.”


“The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.”

Most loans were indexed to currencies outside ISK so that was a great benefit to icelanders on the hook there. Whats the chance here of ‘forgive debt exceeding 110 percent of home values’; instead, we make more mess. They also at the time of meltdown threw a cloak over depositors money in the banks to avoid pillaging of that.

Compared to the sneaky bailiff interrogator/debt extractors here looking to deal on a case by case basis and extract as much from the legally/financially unrepresented,
hiding all under the carpet……

Iceland is growing much faster than the euro and most Icelanders don’t want to join 🙂

An alternative analysis of the Icelandic numbers (in the prevailing spirit of natives always looking for the cloud around any silver lining)


“The bottom line is that the new economic growth in Iceland and the ascent of housing prices aren’t supported by fundamental economic activity but debt, capital controls and speculation. The momentum is good but the way forward is winding. Lifting the capital controls without shocking the economy won’t be easy if investment does not return soon. In fact, if investment does not return soon, the economy is a goner.”

@ Bond

Re “Can you stop calling Ireland Tir Na nOg btw, its getting a tad repetitive and less funny each time…”

No, and it’s not meant to be funny !

Consider it the Gaelic version of ‘rose tinted glasses’. We do have our heritage and culture to protect. I’m thinking Anglo Saxon, Orwellian metaphors are boring also. I do use each occasionally; I must look for some Asian perhaps Mandarin equivalents. I was thinking this Wild West movie
might be a rich source as well, but I dont see the troika here:-) http://www.youtube.com/watch?v=HWIlGnJDRzw

“What do people feel about Iceland’s approach to debt forgiveness?”

Makes sense for them, having subordinated banking interests and the interests of those holding wealth denominated in Krona to the democratic will of the people.

More difficult in Ireland where we have irrevocably committed so much of the peoples’ wealth to keeping the equivalent interests whole as to wipe out much of the potential benefit of reverting to the Icelandic approach.

We should have taken the full blown Icelandic approach when we had the chance. I’m not convinced, even now, that the balance of advantage is against it.

EFTA will decide this year whether Iceland is in breach of its Deposit Guarantee Directive. The result of that case will determine whether Iceland is liable for $5bn in compensation payments. For a country with a population one fourteenth that of Ireland, this would be a considerable burden.

Unsustainable capital controls and overfishing are last resort policies.

” capital controls have resulted in an intrusive licensing regime, with government permission required for foreign travel and those emigrating prevented from taking their assets with them”

@ Aisling

You are facing an uphill battle! The reassuring thing, however, is that the Ireland versus Iceland debate has by now shown itself to be so completely irrelevant that it no longer generates any real interest other than in terms of debating various economic models and theories.

“Leaving foreign creditors in the lurch” (quotation from original article), the imposition of capital controls, and the differences in levels of energy dependence that you mention (to add to all the other more obvious ones), might suitably be added to the mix.

@Ossian The amount isn’t the $5bn, it is the cost of funding the $5bn.

The estates of the Icelandic banks are on course to repay the $5bn over time, but the UK and Netherlands had to step in to bail out their depositors back in 2008.

What’s potentially been lost then is the time value of the money and if the substantive case for damages is run in the UK it would probably be based on restitution so the UK and Dutch Govs would be looking for Icelandic Gov interest rates rather than their much lower rates.

If the action is not in restitution then you’d probably only be looking at gilt rates resulting in a much more manageable amount.

Unemployment is mentioned 4 times in this thread (3 times by the same poster). Emigration is mentioned 2 times.
How can we discuss economic impact in GDP/GNP and not pay more attention to unemployment and emigration?

@DOCM to fellow legal eagle Aisling

You are facing an uphill battle! The reassuring thing, however, is that the Ireland versus Iceland debate has by now shown itself to be so completely irrelevant that it no longer generates any real interest other than in terms of debating various economic models and theories.

No longer generates any real interest other than in terms of debating various economic models and theories? As opposed to the real meat of this blog – why practical solutions to the European component of the global financial crisis are either not permitted under EU law or the dangerous mutterings of leftists, anti-capitalist agitators or the tin eared?

It could not be made up – economics polluting a debate about the overwhelming necessity of adhering to the “principles” enshrined in the laws of the new EU (deflation, privatization, currency hawkishness, respect for corporate power, technocratic government and something about septic tanks to keep the hippies quiet).

Sorry Stephen.

The shrillness of the rants seems to be directly related to the impotence of the left and inversely related to the popular support it secures.

@ Aisling

On that particular point, the UK and Dutch governments stepped in to protect depositors who should have known that if the rates being offered by Icesave seemed too good to be true, they were!

Lex recently had a good comment on the situation.


Iceland has enough friends at court in the EU to gain membership but is living an illusion if it thinks that it can retain control of its fisheries at the same time. (The conservation of marine biological resources under the common fisheries policy is an exclusive competence of the EU).

Of course, given the supposed advantages of the route taken by Iceland out of its difficulties, one wonders why the country wishes to join the EU.

@DOCM But we always have laws to protect stupid retail investors from themselves hence the directive.

Repeat after me, domestic retail investors are real people who should be protected, whereas all other investors are nasty speculators who are the source of all evil in the world. In fact this was the Icelandic basis for voting no to the referendum on repaying the UK/ Netherlands by agreement rather than waiting to be hauled up in Court (why should Iceland repay foreign depositors – omitting to mention that they were obliged by the directive to protect such depositors).

I digress.

It is important to note that the case before the EFTA court is just the infraction proceedings by the surveillance authority and not the substantive action. Once the EFTA court rules then substantive action can commence accepting a failed interposition of the directive as res judicata.

Will be later this year that the EFTA court rules, actions will then commence on the substantive issue which probably has issues with causation and how to proceed (indeed limitations issues might force the mistake route) so plenty of time for a negotiated settlement if the Icelandic electorate hadn’t blown that up twice.

But as you said, how bizarre that they want to ditch the Krona and join the EU and euro. If speculators weren’t the source of all evil as I stated above, then some evil would have to be attributed to the EU and euro and ECB and…


But as you said, how bizarre that they want to ditch the Krona and join the EU and euro. If speculators weren’t the source of all evil as I stated above, then some evil would have to be attributed to the EU and euro and ECB and…

Neither the Danes or the Swedes are in any rush to join the united monetarist fallacies of Europe while the Croats intend to avoid meeting the convergence requirements for the same reason. The Krugman had some nice graphs on the advantage Sweden had over Finland in funding costs just by being less entangled with Frankfurt.

Now Iceland, which has a population less than the size of Belfast, may calculate that the costs of running its own currency are simply too high especially after their part of the global financial crisis, but is there anyone already in the EU who still wants to trust their fate to our highly politicized, incompetent monetarist friends in Frankfurt?

Well, apart from people whose interests are closely aligned with those of the financial sector and the neoliberal psychopathology which caused this whole mess….

@Colm, the tir na nog thing is getting a bit old frankly.

@Aisling, interesting link, thanks.

@all, I think this discussion is very relevant to today’s Ireland. Of course there are differences between Ireland and Iceland, especially regarding energy generation and usage, but overall the two countries have important similarities that make them worthy of comparison and discussion. To what extent, for example, does the Icelandic experience represent the ‘road less traveled’ for Ireland?

@ Stephen

for one thing, i think the issue about capital controls is not understood well. Its not simply about the ability to import or export, but it hits at real purchasing power, real wealth, and it is not in any way some form of temporary measure at this stage. What Iceland are trying to do is, in some ways, wipe the economy clean and start again. If you had a pension, or accumulated domestic paper wealth (cash, bonds, equities), you have been savagely hit as a result of the Icelandic solution. While we bemoan, rightly, the need for some people to emmigrate, Iceland is essentially doing the opposite by decree – not letting you take any of your past with you to start afresh elsewhere. I don’t think you can call Iceland a success simply because they have regained an investment grade rating and have some positive economic indicators. Whats the real, overall wealth of the country? Isn’t that a better gauge?

@ Aisling

Duly noted! However, it is probably necessary to make some contributors to this thread aware of the existence of the European Economic Area of which Iceland is a member and which results in it being subject to EU law (if indirectly in terms of arbitration).


The situation of Iceland has to be judged in more terms than an uptick in its credit rating. And its relevance to Ireland’s situation is zero as far as decision-making in the real world is concerned.

I take your point about measurement of the total effect–of course GDP, etc are just partial measures. The total wealth of the nation should be available via its quarterly financial accounts, so that’s a question we could answer I think, pretty easily.

@ Stephen,

Speaking of censorship, this went missing from a previous site it was available from, now available here:


Tir na NÓg is as old as the left and right moniker, speaking of which, can you tell your left from your right? I find TNN useful moniker to make sense of a hidden Ireland kept from public view.

I used to be able to distinguish between political left and right; now, as ICB’s across Europe become a Europeanised version of Russian oligarchs, the untouchables, such labels are becoming defunct.

For example, we hear today of a purchase by treasury holdings gombeens from TNN, of real estate in New York near Central Park.

The interesting thing is the purchase was in 2009, a year after Lehmans, barely caught a news item on this but the purchase I believe cost somewhere in the region of $300ml
but you’ll need to verify the full figure.

Because of commercial sensitivity its difficult to get a handle on what is going on in NAMA’s Tir na NÓg, that’s why these 4 day court proceedings are so interesting. How did these guys get loan approval for that NY Central Park purchase? IN 2009 ????

(Now, now, Stephen, you know you are a budding censor, take your finger off that delete Tir Na N’Óg button :-))

Probably the same way the gombeen oligarchs got loan approval during the Celtic Tiger, the same guys in charge in the banks protected by Omerta are still creating the same mess it seems.

So, right has now become left and black is white. Capitalism (the right) is now Socialism (the banks of the right). I’ve had to jettison old style left and right monikers to find more applicably descriptive monikers. I think I’ll stick with TNN.

As the EMU lurches towards its New Age version of EUSSR eventual collapse of the Euro is on the horizon. But Armageddon doesn’t beckon. The ruble collapsed and within a short space of time, order was restored and the Russian economy went into overdrive.

“RUSSIAN SOVEREIGN DEFAULT AND DEVALUATION 1998 Much like Greece today, the international community, the IMF, governments and holders of Russian debt thought default would be catastrophic. The government was told repeatedly that default would mean that Russia wouldn’t be able to access the credit markets for a generation and that foreign money would never dare return. Following the Asian crisis, in late 1997 and early 1998, Russia received very large loans from the IMF and the World Bank because Russia had trouble accessing international debt markets. Much like Greece today, borrowings from other sovereigns and the IMF did not resolve the solvency crisis. Ultimately, in August 1998, Russia defaulted on its sovereign debt and devalued its currency. The expected catastrophe didn’t happen. The pain lasted only about six months, followed by a decade long boom. The Russian stock market, which had declined by 90%, increased over 4000% over the next decade. Russian industrial output rose over ten times over the next decade. The private sector benefited massively from the boost to competitiveness provided by the devaluation.”

I guess there is no chance of getting a full debt profile for Ireland on the annual cost of paying back debt as a percentage of budgetary intake over the next 10-20yrs?

Not in Tir Na NÓg it seems. Leave that to US economists?

Be hopeful, lads and lassies 🙂

@ Bond,

Re “Whats the real, overall wealth of the country? Isn’t that a better gauge?”

Depends how you measure it.

IMF and bailout would make us officially bankrupt; some say we are also the most heavily indebted country in the world.

But its an interesting question ? Junk bond status, huge CDS and banks on the brink with awesome private debt levels and deepening negative equity.

Without NAMA what would prices in residential and commercial property fetch? Its far easier to say we are on the cusp of a boom because Paypal are opening.

On the other hand, farmers doing very well and price of land is keeping up and agri exports are doing well.

Best index is unemployment. Communities are being devastated by this; young people have no jobs; the highly educated are forced to leave. Again, you can look at a country vis a vis GDP and a few sultans own all the oil while the riches are not shared? Can you call such a country wealthy?

@DOCM on Iceland

And its relevance to Ireland’s situation is zero as far as decision-making in the real world is concerned.

And so it was that Steven Kinsella joined the ranks of Paul Krugman, Joseph Stiglitz and possibly Eric Dor whose puny minds fail to grasp the otherworldly uniqueness of economics in the EU (and possibly the EEA) – bound not by exchange rates and liquidity, access to capital of labour, resources or technology, outdated concepts of national welfare or crude expressions of idealism – but by law.

Law which, I must add for the benefit of certain readers who fail to understand the realities of our situation, was drafted by angels and is enshrined in the Codex Neoliberalia, which is guarded by fearsome Rhineland capitalism maidens in a basement in Brussels. This precious, precious law can never be changed without a loss of credibility, seriousness, dignity and the pollution of our competitive fluids followed inevitably by the ATM’s stopping and a panicked population cracking open their neighbours skulls and dining on the delicious brains within.

Much as happened in Iceland.

@ Colm

no offence, but anyone who mentions the Russian default without mentioning oil prices rising to $150 a barrel needs their head examined.

Re unemployment – if thats measure, then Spain is chronically bankrupt. But its not. Its actually a very wealthy country. Also, Iceland’s junk bond status is much more intact than ours, and they operate under a regime of authocratic capital controls. You reckon that much of their wealth may decide to emmigrate if they are ever opened up?

The boys at Harvard reckon Ireland can recover and can sustain our current GDP levels, which have us as an extremely wealthy country, because of our ability to produce and export high value goods and services. See the thread here a week or two ago, “What Greece can learn from Ireland”.

@Stephen Kinsella
” To what extent, for example, does the Icelandic experience represent the ‘road less traveled’ for Ireland?”.

In economic terms Iceland did exactly the right thing. In economic terms any country that found itself in a position similar to Iceland or Ireland should do exactly what Iceland did. That’s what it says on the tin. And it clearly works.

In political terms Iceland faced a lesser onslaught that Ireland would have faced. Trichet, acting in the interests of the French banks particularly and the German banks, was prepared to go to war with Ireland. It is now clear from the Geithner intervention, that the US would have sided against Ireland with the possible forced withdrawl of US companies.

This was a war and Ireland lost. The battle is over. The Europeans won.

Similar to the defeat at Aughrim, the Irish cavalry fled leaving the infantry to be cut to pieces.

Ireland has been taught a hard lesson about Europe. It is still learning an even harder one about the Irish. The Irish cavalry in particular.

Any link to the report referred to in the Bloomberg article?

Had a look on the Icelandic Financial Services Association’s website – but no sign of it there.

Nor is Google my friend on this occasion.

13% of GDP sounds like bullshit to me.

This is an interesting thread.
First step is to decide how do you measure how a country is doing?
Second step is to compare those outcomes.
First step has choices:
a) compare GDP/GNP
b) compare unemployment
c) maybe compare purchasing power – how about this – what percentage of the population can afford to purchase shelter, heat and food? What percentage can afford to travel etc etc

I think what this thread shows up is that economics struggles to measure meaningful economic performance.


No harm to you, but the boys at Harvard have mistaken the FDI sector for the Irish economy. All will be revealed in due course.

My thinking is this.
This is essentially a two stage crisis – you face up to your debts and you cut your deficit.
Iceland has done it in that order. Ireland is doing it in the reverse.
Unfortunately Ireland cannot escape the fact that at the end of 2013 its day of reckoning will have come. At that stage the markets will probably have been so spooked by at least 2 defaults that meaningful re-entry into the markets will be extremely difficult. So by the end of 2013 we will need a second bail out. That’s when we are going to have our Iceland moment.

@ Bond

“The boys at Harvard reckon Ireland can recover and can sustain our current GDP levels,”

No offence meant, but your capacity for self delusion I find quite endearing 🙂

Could you ref the particular ‘boys at Harvard’ documents. Some of these boys have already starred in ‘Inside Job’ and I wouldn’t put it past some of the stars of that show to doctor the docs; they may already have some skin in the hedge funds exposed to default here.

Harvard is one of the best universities in the world but not all their economists have excelled in their predictions in the past. So what papers are you referring to? I like to collect these so I can store in a library somewhere and when the you know what hits the fan here and in Europe, I can laugh and ruefully learn.

The same blind stuff you got there is the same brand I got under the previous FF administration. Then as now I predicted the crash and the IMF on the doorstep. We are being sold the same rubbish.

You appear to be locked in on this question of oil prices. With petrol heading here for ¢2/litre this is already hitting cost of doing business. Import substitution, alternative energy, solar, wind, tide, sectoral subsidy, car sharing, sacrifices will have to be made inside or outside the euro.

The fact is we’ve chosen to comply with the Borg of the EMU driving the EUSSR. The PIIGS are not going to go away.
The Greek Anglo will behave just like Anglo and like Anglo its problems will accelerate and not go away.

This country is no longer run on free capitalist principles. We are a puppet state administered by the Troika dependent on its funds and perhaps on the way to cold war Albanian ‘Compact’ status.

Re Spain, its banks are hidden and protected under recent
LTRO funding arrangements, meant to help recapitalise its banks to help purchase its sovereign bonds, meant to hide its losses on a property bubble we’ve owned up to that Spain is hiding from.

The EMU is a game of pass the parcel of debt with any free money being sucked out of its economies upward to pay for banks’ losses. Go figure, the emperor has no clothes on; the joke is Irish GDP levels and the delusional recovery/growth nonsense, in the face of overwhelming evidence to the contrary: DEBT levels.

Bond, we are not going to agree, are we 🙂

@ Colm

“Some of these boys have already starred in ‘Inside Job’ and I wouldn’t put it past some of the stars of that show to doctor the docs. they may already have some skin in the hedge funds exposed to default here”

So does your debating style extend beyond throwing around baseless accusations? First central bankers, now academics. Not sure there’s much point in debating against such high brow rhetoric. But as long as you’ve got your smiley faces and repetitive phrases, im sure you’ll be grand…


“the markets will probably have been so spooked by at least 2 defaults that meaningful re-entry into the markets will be extremely difficult. ”

PR Guy’s dream – able to blame it on another partry and/or external events when everything goes belly up.

All we have to do is not be the first to default (preferably not the second either)…. I can see the copy now…..

….even plucky old Ireland…… knuckled down to austerity…… poster boy….. model…. bond rates down dramatically at one point…. did this did that…. contagion from… stoic….. taking their medicine…. domino effect…. brought down by the inability of others to….. southern periphery….. German insistence….. global recession….. Herman van Rumpy-pumpy…. faulty fiscal compact….. EU intransigence…… cyclical….. structural….. fiscal…… pass me another pink gin boy.

@ Bond

More ad hominem mo-shu-shi from you then, no pointers to the docs I asked for 🙂

Not me that’s tellin it as it is, I’m referring of course to

Charles Ferguson in Inside Job

He makes further points you regard no doubt as baseless points here: he asks for “independent oversight system that can identify and discipline conflicts of interests among professors and academics.”


@ Paul Quigley

Only time for a quick glance, looks to be pretty sound analysis there:

With these projections they expect us to default !

Expected growth in GDP 2009-2020 1.65%

On another ranking they raise this to

Ranking 3 ….2.71%

Expected contribution to world growth ranking

Greece 41
Ireland 42

They must think we’re worse than Greece. I’m guessing its on the basis they ‘know’ the mess we’re in; we’re still in that denial stagE.

@ Colm

“More ad hominem…”

Maybe you should read the research and try and debate against it directly, rather than resorting to cheap innuendo based on a film you saw…

@ Stephen Kinsella,

If you’re still there – an actual economics question for you, which I think is relevant to this thread.

I read that in countries with a long-term low inflation rate, the value of their currency tends to rise over time.

Is this true? Is this a significant factor?

Also, I was wondering, is the converse true? In a country where the value of their currency is decreasing, does inflation tend to rise?

Is that true and if true is it significant?

@ Gavin,

Inflation by definition tends to devalue a currency even in low inflation over A long period of time. Where value of currency increases, = its opposite, ie deflation. Its very significant for a currency tied to a fixed exchange rate, such as the euro. In fact, its a major argument why we need to leave the euro; we cannot devalue inside the euro.

To bring us back to the topic under discussion. This is another reason we are unlike Iceland


A major component in their recovery was not only their decision to allow banks to fail, but NB to devalue the Kroner

We, on the other hand, like vassals before their Lords, conned into the false belief we have no choice in the matter, have decided to carry Pozzo’s(ECB) suitcase of sand(troika bailout of banks), save the European banks, save Irish banks, all paid for at your family’s expense now and over coming generations, tied to a fixed exchange rate that makes us economically competitive against our ‘partners’…

Final point I’d like to make on this thread:


“Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association. “You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”

For people to accept the yoke, they must believe they have no choice.

The role of population size is an important factor; Iceland, approx 308,000, Ireland approx 4.500,000+. Icelanders were much more individually effected by their meltdown. They threw rocks outside their parliament in the early stages. Information on what was happening was much more freely available.

Ireland, on the other hand, successfully kept prying eyes away from those with their hands on the rudder; they successfully persuaded a majority of people, the decisions taken on their behalf were necessary and there was no choice in the matter.

They successfully persuaded those who created the mess that they had most to gain by handing the mess over to european ‘partners’ to fix; but that they would need to accept any medicine provided.

They also insured that those in the banking and financial sector who created the mess, those with most clout in Ireland’s FIRE economy, would be protected most in any loss situation. The Government also segmented the population protecting those on higher earnings ie those with most purchasing power over those on lower incomes.

The lesson must be that disenfranchising people in a democracy comes in many shapes and forms in EUSSR LAtin American style ‘pyramid’ democracies where power is distributed vertically upward out of the reach of ordinary people and fenced in by governing elites whose role is to hide the invisible hands on the puppet strings.

In Iceland, with smaller numbers, small is beautiful, Democracy and true capitalism simply work better 🙂 Ireland, on the other hand, has become a puppet state of the EMU/Troika, whose main agenda is to protect failed banks locally/internationally, in violation of simple rules of capitalism, such as the avoidance of moral hazard.


Thus we have old ladies on waiting lists of over two years who’ve worked their whole lives serving the needs of their families, blind, unable to see, because the state won’t provide for their needs.

Lastly, Iceland dealt with its economic problems head on. Ireland, on the other hand, with Troika bailouts, distributed its risk into the future hoping to get Lucky, that Pozzo would be kind and merciful. Pozzo(ECB/Troika) meanwhile gained respect for Lucky gamblers in Ireland who had lost all before; but now had new bailout borrowings; these bozos could be relied upon to payback their PN’s. I wonder could you bet on that ?

@Stephen Given we have for years sought to encourage MNCs to locate their treasury, holding and IP holding operations in Ireland or in Irish entities how could you possibly implement capital controls without creating a significant risk to these activities?

This is beside the fact that we’d have to leave the EU in order to implement the capital controls to begin with, membership of which is itself a driver in FDI.

To try and design capital controls which didn’t offend one of the largest sectors of our economy, would be like trying to design a bucket with holes in the bottom. So capital controls? There’s a very good reason why we didn’t (and shouldn’t) travel that road.

@ Aisling

The arguments using IFSC against leaving the euro are getting thinner and thinner. We’ve recently spoken of the danger of a Financial Transaction Tax blunting operations in IFSC. Obama is currently moving towards abolition of the tax breaks availed by MNC’s using transfer pricing and other corporate CT dodging. In fact, our Cayman Islands status as a tax haven given these factors, in the present environment, is rather an argument we should leave the euro. Capital controls in an open economy like ours can be temporarily designed to facilitate transition to a new currency. The concept becomes even easier to manage if a link to UK sterling was envisaged. The precedents for this are many and more frequent than imagined.

There appears to be an even handed approach to freedom of discussion/comment in Iceland; in Ireland, there is a distinct whiff of censorship, propaganda, media control and distaste of critical thinking that does not represent the status quo.

This morning I saw a comment, a single one I made on the post The IT on Academic Blogging, put up by Karl Whelan, missing from the comments. Plus comments section was closed down.

irisheconomy.ie as a bastion of uncensored free speech in the public interest has been severely damaged in my estimation.

This is a first for me. It’s worthy of a Senator McCarthy. It was a good post with good points on healthy development of reliable and sound information made so by critical challenge and free from censorship.

I call on Karl Whelan to apologise and return the post and open discussion he has closed down on that interesting topic; it confirms my view of the discomfort at criticism through the blogging tools of some in academia.

You do get to question the very basis of blogging if removal of comments is now a censoring tool.

Note I am fully against troll comments. Such comments can be easily moderated and deleted by moderators and comments returned to offenders if libel/slander or plain nastiness is their intent. I’m requesting a copy of the ‘offending post’ and full explanation as to why it was withdrawn.

Its quite another when comments that ought to inform informed debate are removed purely because they apparently traverse the bounds of the
moderator’s prejudice.

Its rather sad Karl Whelan has chosen this route.

I’ve now to decide whether its worth my while making any contribution to this blog in the future as I’m no longer certain what has or has not been censored.

I’m certain this will come as a relief to those whose ideas I oppose who prefer to preach to the already converted 🙂


OK, folks, this is what I’ve decided.

For the record, I’ve no personal gripe against KW, but I do reserve the right to criticise his ideas if he commits them to paper.

If I decided not to post, this would leave me open to the allegation of giving in to intimidation or bullying.

I also regard myself as one holding minority views and a whistleblower, speaking of which, for such an important piece of legislation, particularly in that another blogger on this site complained recently of being unable to get work in Ireland in the energy sector, it’s legislation that has a role to play here.

Any chance of a post on this?

Lastly, Karl has a post re PN discussion on VB last evening, for which he wont allow comments though he makes use of opportunity to make extensive comment on the matter himself.

He has closed down and removed a comment from me on a posting to discuss the topic of blogging raised in IT article.

In one of the comments there is a link to suggested moderator guidelines for dealing with ‘trolls’ as a professional internet person and supporter of the right to free speech I find anethema.

We are all highly literate adults here who go to the trouble to read academic and journalistic etc ideas on economic matters and express our views opening our comments to peer review and rebuttal.

I learn both from those I disagree with and from those I agree with. I wouldn’t be on this blog if it were a blog for a bunch of teenagers discussing what to do on a Saturday night out on Facebook.The ‘guidelines’ referred to above suit such a scenario.

They do not suit a site where such guidelines could be shown in any fair whistleblower situation as breaching the rules of justice, fair play, right to free speech.

Could someone point out to KW that he’s made a mistake. I’m no teenage troll. People make mistakes including KW.

Its perhaps more important on a site like this to respect the right to free speech than on a Saturday night out teenage one for which the ‘guidelines’ refer in the IT on blogging post.

If we’re highly literate adults, we should be respected for this and that we’ve gone to the trouble of informing ourselves on the topic under discussion.

Lastly, expect occasional long winded comments from me on topics I’ve an interest in 🙂 Speaking of which, kudos to Stephen for post on Iceland, mcCarthy on Endgame, KW on his PN’s.

Perhaps some maturity and tolerance of views other than our own can help this blog mature and make a solid contribution to intellectual debate upon matters of some consequence to all on this small island.

The alternative is some mendacious descent into a form of censorship and mind control you dont wont to go there.

There are plenty of other sources of information and resources for me to concentrate on outside Ireland; if I go, though I don’t wish to appear arrogant, believe me, you guys will lose more than I will 🙂

But I’m back and havn’t gone yet 🙂 Bored now.

“Indeed. Today sees Iceland(!)’s sovereign debt return to the rim of investible as Fitch upped their rating of Iceland(!)’s debt to BBB- but stable.”

Iceland is healing and this is a scheme by Fitch and the other global pawns to sucker them back into a farcical financial system. If Iceland becomes investment-worthy enough, the pawns can inflate a bubble there again and reignite their failure. Great for Iceland but they don’t need the “investor confidence”

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