Tuesday, 18 December 2012

Who was right? Ireland or Iceland?

Ireland took the austerity medicine. Iceland told bank creditors to take a hike. Guess which country has lost the confidence of the markets? Guess whose economy is recovering?

In the Irish Independent, Dan White observes of Iceland:
...by burning the bank bondholders rather than taking these debts on to the national balance sheet, the Icelandic sovereign is in a far stronger position to repay any future debts.
In Ireland, meanwhile:
By being good boys did we retain the confidence of the markets? No we didn’t. We too were locked out of the markets and were bounced into accepting an EU/IMF bailout in November 2010. Far from doing better than the Icelandics, we have ended up with the worst of all possible worlds. We are still stuck with the banks’ legacy debts and, a few carefully choreographed fund raisings by the NTMA notwithstanding, the State remains largely reliant on official lenders to fund its activities.
He concludes:
Maybe, instead of being the good boys it’s time we followed the Icelandic example and indulged in some Viking-style plunder and pillage.

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