‘Let the Banks Fail’ Says Iceland President
Iceland is in economic recovery with lower unemployment rates than Europe, and its President says “let the banks go bankrupt”, speaking at the annual World Economic Forum in Davos, Switzerland (23-27 January, 2013.)
In an impromptu interview with the Al Jazeera News Network’s Stephen Cole, Iceland’s President Olafur Ragnar Grimsson explains that his country was able to rebound from the worldwide financial crisis better than all other countries that faced the same problems, by doing just that, allowing the failing banks to go bankrupt.
He says “we did not follow the traditional, prevailing orthodoxies. We introduced currency control. We let the banks fail. We provided support for the poor. We did not introduce austerity measures on a scale you see in Europe. And the end result 4 years later, Iceland is enjoying progress and recovery very different from the other European countries that suffered from the financial crisis.”
He added “why do they consider banks to be the holly churches of the modern economy? People in enlightened democracies are not going to accept that in the long run.”
At the start of the world wide 2008 economic collapse, Iceland was in worse shape than almost any other country in the world. Its three major lenders collapsed under $85 billion in debt, and the country was facing a full economic crash.
However, instead of following the prevailing neoliberal economical wisdom, Iceland did the opposite. Instead of bailing out the banks, it brought charges against many involved. The banks were nationalized.
The government implemented capital controls to prevent the flight of money from the country and paid all domestic depositors. It instituted a private debt forgiveness program along with paying welfare payments as much as possible, controversially, refusing to repay (mostly UK and Dutch) foreign creditors.
The government also has been diversifying the economy by shifting its economic focus from banking to more traditional pursuits such as fishing and tourism, also seeking out new areas to develop.
Iceland’s Economy is now growing faster than the U.S. and EU as one of the fastest growing economies in the world.