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Why Iceland’s economy has not recovered

Iceland has a new news magazine called Kjarninn, which was launched by a couple of journalists who were the victim of a “purging” undertaken by the owners of Fréttablaðið a few months ago, when they disliked the way their journos were reporting news about them. Anyway, Kjarninn is apparently produced on a shoestring (though there is an app), but they have some excellent reporting – far superior to the mainstream newspapers.

Here is a quote I read just now concerning the supposedly miraculous recovery of the Icelandic economy, the capital controls that are still in place, and the huge task facing the nation – which our current rulers have resolutely decided to ignore:

“One cannot claim that a nation that needs such controls has solved its economic problems. They are, at present, like an insurmountable fence that impairs the quality of life and competitive ability of the nation.

“When the controls were originally implemented they were supposed to be in place for a few months. Those months turned into a few years, and now, nearly five years after they were activated, their time frame has become indefinite and there is no way of seeing how they may be lifted. There is, you see, a long string of parties who want to leave Iceland with their Icelandic kronur. These parties – foreign ISK owners, foreign claimants on the fallen banks, and Icelandic parties – own between 1,700 and 4,150 billion ISK, equaling one or two times the nation’s GDP. Icelanders need to obtain foreign currency in order to release these parties, in order to be able to lift the capital controls. A solution to this problem is not in sight.”

I probably don’t need to tell you that, if the capital controls were lifted and all those people took their money out of the country, this nation’s economy would collapse in an instant. And yet, while we live with the controls, no one wants to invest in Iceland, we cannot invest anywhere abroad (including buying property), or even take out money when we go on vacation without special permission. It’s a horrible quandary, and – again – one which this current government is doing nothing to address. As though, if we just close our eyes, the problem will go away. As though we can continue with the ISK and all will be fine. Which it won’t be.

And obviously, this nation’s recovery is nowhere near complete.

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