A Grapevine service announcement Be patient: That eruption is expected to last until 2015

Moody’s Keeping An Eye On Icesave

Published December 26, 2011

Economics analysts Moody’s have kept Iceland’s rating the same from last spring, giving mixed reviews of the state of the economy, while indicating that legal proceedings over Icesave could change the country’s rating for better or worse.
As has been the case since last April, Iceland’s rating remains at Baa3 – a less than ideal rating for a country hoping to attract foreign investment. Why would this be the case if the country’s economy has, by Moody’s own assessment, been improving over the past year?

The economy has finally started to improve since Q3 2010 and is expected to rebound moderately this year and over the medium term, stimulated by the weak exchange rate and new investment in power-intensive industries. However, there are significant uncertainties, in particular regarding the outlook for investment which depends to an important extent on the speed with which the strict capital controls will be abolished.
Iceland’s ratings are limited by the government’s strained balance sheet, which has been significantly damaged because of the assumption of large financial liabilities following the banking and currency crisis.

Even while acknowledging that the income of the average Icelander is still far above the global average, the small size of the economy makes Iceland susceptible to major economic shocks. Moody’s also noted a delicate balance needs to be struck between capital controls and liberalisation.

Iceland is considered to have a high susceptibility to event risk, mainly on account of the risks entailed in the process of capital control liberalisation. On the one hand, the lifting of the capital controls and renewed access to external funding are crucial elements for a sustained recovery in Iceland. On the other, a too rapid relaxation of capital controls risks creating excessive exchange rate weakness. Foreign investors – trapped in the country when the capital controls were introduced in late 2008 – hold an estimated ISK465 billion (approx. 30% of GDP) in assets in the country. Most, if not all, will want to exit as soon as possible, with significant implications for the exchange rate, if their exit is not properly sequenced and managed. Once there is a track record of successful steps in liberalising the capital controls, we will probably consider moving our assessment of susceptibility to event risk back to moderate.

One interesting note is that, like EFTA, Moody’s has also not forgotten about Icesave, and cite it as a factor in contributing to future ratings for Iceland.

The rating could be downgraded if the current commitment to fiscal consolidation showed signs of declining or the remaining legal risks related to a resolution of the Icesave issue resulted in a significantly higher liability for the government than is currently expected.

The full report can be read here.



News
<?php the_title(); ?>

Police Fail To Withhold Names And Identities

by

Police have disclosed an internal report about its actions and organization during public demonstrations in the advent and aftermath of the 2008 ecomonic crash, including events related to the uprising known as the “kitchenware revolution”. This is in accordance to a ruling made by the Information Access Complaint Board last week. The board ruled that the report should be disclosed as demanded by author and activist Eva Hauksdóttir since 2012, while the identity, names and addresses of various individuals and officers involved should be withheld. After distributing three copies of the report to select media outlets, the Police were made

News
<?php the_title(); ?>

110 Earthquakes In 24 Hours

by

Vísir reports that, during 24 hours from Friday morning to early Saturday, 110 earthquakes were measured in and around Bárðarbunga. Seven of those measured at or over magnitude 4 on the Richter-scale. The biggest in the series was of magnitude 5.2 shortly before two o’clock Saturday morning. Bárðarbunga has been in eruption for close to two months now, or since August 29th. Twenty minor earthquakes were measured around mount Herðubreið, none over magnitude 2.

News
<?php the_title(); ?>

Gas Pollution Blows West on Saturday, East on Sunday

by

The Met Office predicts volcanic gas pollution around the Western, North-Western and South-Western coasts and inlands on Saturday. On Sunday gas pollution is expected on the Southern-East coast and inlands. The Met Office has introduced an online interactive visualizer of its gas pollution forecast model. The Met Office warns that this model is still in development and that predicted levels of SO2 output are imprecise.

News
<?php the_title(); ?>

Pasha’s 4th Day on Hunger Strike

by

Today, Adam Ibrahim Pasha concludes the fourth day of his hunger strike, which commenced Tuesday. The hunger strike is in protest of the Directorate of Immigration’s (UTL’s) recent decision not to review his application for asylum. Pasha says he will rather die than be deported. Earlier today, he said he felt weak and in need of hospital care. Social services will supposedly visit him today, but at the time of this writing it remained unclear if they would be accompanied by a doctor. [Update:] Pasha was visited by social services today, as well as medical staff, which arrived by ambulance.

News
<?php the_title(); ?>

Former PM Regrets 1968 Racist Remarks

by

Former Prime Minister Geir H. Haarde says that regrets and feels ashamed by racist remarks he made in a school paper at the age of 17. Geir’s article, “Maladies in our Society” resurfaced earlier this year. Its final paragraphs consist of explicitly racist remarks, including: “… I want to mention the highly increased blood-mixing of people of color and Icelanders. I think that such mixing is, to say the least, highly undesirable and unhealthy. The results of mistakes made by nitwits in these matters can be horrendous.” And so on. When the paper came under public scrutiny, last January, Geir

News
<?php the_title(); ?>

Blacked Out Street Lights For Better View Of Northern Lights

by

An employee of a travel service recently extinguished all street lighting by Kleppjárnsreykir, in the inlands of Borgarfjörður, by aiming a flashlight at their light-sensor controller. Apparently he did this to give a group of tourists a clearer view of the northern lights at play. According to Skessuhorn, a local news medium, this created great danger for the people who stood on the road to observe the sky, insufficiently visible to drivers, in the dark. Police authorities in Borgarfjörður received a complaint about the incident. The rhapsodic tourist guide told police that he had taken care that the travellers did

Show Me More!