Source: Business Insider
For Ólafur, president of Iceland, the crisis of 2008 was personal. The sudden collapse was a painful reminder that Iceland was a small, isolated place.
Now, of course, most headlines we see about Iceland seem positive. Iceland is repaying its IMF loans early, unemployment is down, and growth is above average. The streets of Reykjavik seem calm and happy.
Other countries, of course, haven't been so lucky. The crisis remains front page news in Greece, Italy and Spain —countries that followed a very different response from Iceland's.
After the crisis, the country held a full judicial investigation, and went against "the prevailing economic orthodoxies of the American, European and IMF model." Ólafur says that he likes to think that the IMF learned more from Iceland during this time than vice versa.
A key example of this approach is Iceland's refusal to pump money into failed banks. The decision was controversial at the time, but now looks increasingly wise. "I have never understood the argument —why a private bank or financial fund is somehow better for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector".
He says Iceland's lesson is that "If you want your economy to excel in the 21st century [...] a big banking sector, even a very successful banking sector, is bad news." "You could even argue that the bigger the banking sector is, the worse the news is for your economy," he adds, later blaming the huge growth of Iceland's banking sector on the prevailing European banking philosophy and incompetent rating agencies.
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