Iceland is out of recession

Sucker Punch

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Iceland recorded 1.2% growth in the third quarter.

Default and burden sharing seem to have done the trick, rather than the slow death by a thousand cuts.

What's the difference between Ireland and Iceland? One letter and a pair of balls.

Iceland comes out of recession - RT News
 


Sucker Punch

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More info here:

Iceland emerges from recession - The Irish Times - Tue, Dec 07, 2010

Edit:

Following the actions of the Icelandic govt not to honour their banking liabilities, they are now in a postion of recovery and are albe to consider repayment in the near future.

This on foot of the Argentine intention to repay debt to the Paris Clus following their default in 2001. The lesson seems to be clear, recovery first, debt repayment subsequentially.


Argentine bonds and stocks, which rose earlier in the week on talk of a Paris Club breakthrough, slid on Tuesday on fears over Irish debt and Chinese inflation-curbing measures. But Ms Fernández said it was clear the world now had “confidence again in Argentina’s word and its ability to keep its promises...
 
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Sucker Punch

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More optimism for Iceland: The President is expecting to be rid of the IMF sooner rather than later: "the Icesave problem would be “only a minor issue for the long-term outlook.We will grow out of this, and could start now to finance our way out of it.”

Iceland's president Olafur R Grímsson:

"The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn't pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks."
Arsaell Valfells, Professor of business and finance at the University of Iceland:

“This is the proper process. If you go through a bubble economy and you need to correct it, the answer is not to convert private debt into public debt. Rather it is to restructure the debt to the level of the assets.”
 

LowIQ

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Whats the difference between Ireland and Iceland? One letter and a lost generation of growth
 

Neilob

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Hmmm, Iceland might have a pair as has been suggested above, but they have shrivilled away to the size of raisins over the last couple of years. Have a look the following stats before you start thinking it's a good idea to throw the toys out of the pram and stick two fingers to Europe and the IMF.

The economic fundamentals of Ireland and Iceland are similar in some ways. They are both small open economies and export orientated. The fishing industry provides 40% of export earnings and more than 12% of GDP, and it employs 7% of the work force. Like us, much of Iceland's recent economic performance came on the back of a boom in domestic demand following a quick expansion of the country's financial sector. As a result when the banking crisis came there was huge international exposure by the wholesale banking markets to Iceland, and the ratio of Icelandic bank loans came to more than 10 times the country's GDP.

Here's a list of the good news: in 2008 the government let the three main banks collapse without State aid. So how did they fare? Well after loosing the confidence of the money markets the IMF stepped in and loaned them $10 billion. This was used to stabilise their currency, and also (very contraversially) to back government guarantees for foreign deposits in Icelandic banks. Since the bank collapse GDP has effectively stood at zero and declined by 6.6% in 2009. Per capita GDP dropped from $42,600 in 2008 to $39,400 in 2009. National revenue dropped from $6.252 in 2008 to $5.144 billion in 2009. Unemployment increased in a similar period by 8%. Three new banks were established and took over the domestic assets of the collapsed banks; the State owning a monopoly in one and the other two owned by foreign interests. The Icelandic State is currently being sued by the Dutch and British Governments for losses sustained in foreign deposits. Despite this their cash reserves remain untouched standing at $3.57 billion in 2007 and $3.883 billion in 2009.

That all sounds pretty ok all things considered, but let's look at the bad news and size up what might happed to you and me if we did an immediate default. Public debt in Iceland rose to 113.9% of GDP in 2009, doubling from 68.8% of GDP in 2008 (pop off to Iceland - you'll get a good deal on a four wheeler - but get there fast before the owner lights the match). Inflation in 2009 ran at 12% - double Ireland's at the peak of the Celtic Tiger. Get this, domestic interest rates stand at a whopping 18.99% - imagine servicing a mortgage on this!!. The exchange rate on currency has risen from 62.982 on the dollar in 2005 to 128.417 in 2009 - ouch, imagine if your mortgage suddenly doubled. The market value of publically traded shares dropped astonishingly from $40.56 billion in 2007 to $1.67 billion in 2009 - oh no where's my pension gone? Industrial growth production was minus 10% in 2009 - ours is exceptionally healthy. The state current account balance is 110th in the world, which is dismal, dropping from $3.572 billion in 2007 to $440 million in 2009. Fish and fish products now account for 40% of exports, yet 70% of the population work in the service industry - someone has got to be double jobbing on the oul trawlers - imagine if you had to go to Killybegs every weekend. They are the 134th most indebted country in the world, up there with an average African cleptocracy.

Default is a pretty drastic step and we had better be ready for a very significant drop in living standards and to loose our shirts if we go down that road. But then again, nobody died in Iceland and they are punishing their dodgey politicians. They are also coming out the other side after two pretty miserable years - but are you ready to swallow medicine like this? What would you think if there were no public services in the morning and your mortgage doubled? And that's for starters.....

We don't currently have very many choices open to us because of our Great Taoiseach and Minister for Finance's decision to guarantee the banks. You can't separate sovereign debt from bank debt retrospectively - you'll loose all credibility. It's far better to at least make a go of the current IMF/EU plan for a year at least. The market's already know there isn't a chance that we will ever repay, but the markets also know that the wider world and European economy is fundamentally broken and the only way to fix it is to fix world debt. Dawes, Young and Lausanne like plans will be necessary for indebted countries to be forgiven some debt and spread out repayments over longer terms at lower interest. History tells us of the inevitability of default, but unilateral default by an insignificant player like Ireland will completely damage our reputation. We need to begin a game plan of planning out a strategy for an orderly default rather than shocking and stinging our neighbours.

If the 'default now' advocators win the day then you'd better stock up in canned soup and gold bullion cos the newly struck Irish punt won't be worth a tinker's curse.
 

Sucker Punch

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Hmmm, Iceland might have a pair as has been suggested above, but they have shrivilled away to the size of raisins over the last couple of years. Have a look the following stats before you start thinking it's a good idea to throw the toys out of the pram and stick two fingers to Europe and the IMF.

The economic fundamentals of Ireland and Iceland are similar in some ways. They are both small open economies and export orientated. The fishing industry provides 40% of export earnings and more than 12% of GDP, and it employs 7% of the work force. Like us, much of Iceland's recent economic performance came on the back of a boom in domestic demand following a quick expansion of the country's financial sector. As a result when the banking crisis came there was huge international exposure by the wholesale banking markets to Iceland, and the ratio of Icelandic bank loans came to more than 10 times the country's GDP.

Here's a list of the good news: in 2008 the government let the three main banks collapse without State aid. So how did they fare? Well after loosing the confidence of the money markets the IMF stepped in and loaned them $10 billion. This was used to stabilise their currency, and also (very contraversially) to back government guarantees for foreign deposits in Icelandic banks. Since the bank collapse GDP has effectively stood at zero and declined by 6.6% in 2009. Per capita GDP dropped from $42,600 in 2008 to $39,400 in 2009. National revenue dropped from $6.252 in 2008 to $5.144 billion in 2009. Unemployment increased in a similar period by 8%. Three new banks were established and took over the domestic assets of the collapsed banks; the State owning a monopoly in one and the other two owned by foreign interests. The Icelandic State is currently being sued by the Dutch and British Governments for losses sustained in foreign deposits. Despite this their cash reserves remain untouched standing at $3.57 billion in 2007 and $3.883 billion in 2009.

That all sounds pretty ok all things considered, but let's look at the bad news and size up what might happed to you and me if we did an immediate default. Public debt in Iceland rose to 113.9% of GDP in 2009, doubling from 68.8% of GDP in 2008 (pop off to Iceland - you'll get a good deal on a four wheeler - but get there fast before the owner lights the match). Inflation in 2009 ran at 12% - double Ireland's at the peak of the Celtic Tiger. Get this, domestic interest rates stand at a whopping 18.99% - imagine servicing a mortgage on this!!. The exchange rate on currency has risen from 62.982 on the dollar in 2005 to 128.417 in 2009 - ouch, imagine if your mortgage suddenly doubled. The market value of publically traded shares dropped astonishingly from $40.56 billion in 2007 to $1.67 billion in 2009 - oh no where's my pension gone? Industrial growth production was minus 10% in 2009 - ours is exceptionally healthy. The state current account balance is 110th in the world, which is dismal, dropping from $3.572 billion in 2007 to $440 million in 2009. Fish and fish products now account for 40% of exports, yet 70% of the population work in the service industry - someone has got to be double jobbing on the oul trawlers - imagine if you had to go to Killybegs every weekend. They are the 134th most indebted country in the world, up there with an average African cleptocracy.

Default is a pretty drastic step and we had better be ready for a very significant drop in living standards and to loose our shirts if we go down that road. But then again, nobody died in Iceland and they are punishing their dodgey politicians. They are also coming out the other side after two pretty miserable years - but are you ready to swallow medicine like this? What would you think if there were no public services in the morning and your mortgage doubled? And that's for starters.....

We don't currently have very many choices open to us because of our Great Taoiseach and Minister for Finance's decision to guarantee the banks. You can't separate sovereign debt from bank debt retrospectively - you'll loose all credibility. It's far better to at least make a go of the current IMF/EU plan for a year at least. The market's already know there isn't a chance that we will ever repay, but the markets also know that the wider world and European economy is fundamentally broken and the only way to fix it is to fix world debt. Dawes, Young and Lausanne like plans will be necessary for indebted countries to be forgiven some debt and spread out repayments over longer terms at lower interest. History tells us of the inevitability of default, but unilateral default by an insignificant player like Ireland will completely damage our reputation. We need to begin a game plan of planning out a strategy for an orderly default rather than shocking and stinging our neighbours.

If the 'default now' advocators win the day then you'd better stock up in canned soup and gold bullion cos the newly struck Irish punt won't be worth a tinker's curse.

You have laid out a well reasoned and rational argument, which is often in short supply these days. I agree with the general thrust of the prescriptions you have out-lined. Comparing Ireland with Iceland is a bit like comparing apples with oranges, they, I must be realised had control of their own currency. That said, the nuclear option for Ireland would have necessitated us to print emergency cash reserves and all the resulting headaches that would have entailed.

Pulling an Iceland, would have everyone shrieking around here about the harshness of the budget look like they just won a car on winning streak. Forget about a 6 billion correction, it would have been 18 billion in a currency that would inevitably head south in terms of parity of purchasing power. We have however given up much more than the mirage of Celtic tiger comfort and exuberance, our democracy however rancid, has been the first casualty of the deal struck with our partners in crime, the EC/ECB/IMF. Some people might well prefer this, but they are the greatest of fools if they think that the interest of this country will be better served by entities which have regard only for their own backsides. Our Dail, however much a shambles, is ultimately decided by us at the ballot box, we are now bound by conditionalities as laid down by the govts further bail-in to further debt.

Our partners in Europe have screwed us with the interest rates they have set for us, one wonders how this is beneficial for the Eurozone on the whole in the long run and whether they have a death wish? We took the bullet for the failures of not only our non-performing regulators but their's also. Now we are faced with a deplorable situation, where in order to keep the euro from imploding we must tighten political integration. The architects of the euro have hung us all high by insisting upon a course of monetary integration without the necessary political fundamentals to back it up. Given they have proven their ineptitude, how can we trust that the further surrendering of sovereignty will not be rewarded with further punitive sanctions?

Now, is a default worse than the current bail-out (or rather bail-in) situation? Estimates seem to be hovering around the ten billion euro mark for interest payments on the cumulative debt alone, as one third of total tax take that will most likely grind us down over time to a condition that we would no doubt have experienced should we have defaulted on the bank debt ala Iceland, it remains hypothetical question.

Equity for the bond holders in the banks would certainly have been the most advantageous position for the tax payer, the bond holders would certainly have held the likes of Drum and Fiztpatrick to account, probably by hiring the most skilled lawyers in the country to squeeze every last penny out of the bas*ards.
 

robut

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Iceland rises again as Ireland sinks | Business | The Guardian

Iceland rises again as Ireland sinks

"Iceland's central bank today cut its headline interest rate, giving a signal that the island's bankrupted economy was edging back towards health. The country's base rate fell one percentage point to 4.5%, after figures showed the economy growing at a faster pace than expected after seven successive quarters of contraction."

Robut
 


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