This month Peter Day of the BBC World Service attempts to get to the bottom of Iceland’s so-hailed miracle economic recovery. Interviewing Icelandic officials, businessmen, writers and the man on the street, he manages to unpeel a few layers. Is this claim that Iceland’s unemployment has gone from about 11% to below 5% in two years even mildly credible?
Business Editor of Morgunblaðið, Agnes Bragadóttir, tells Peter that what the Icelandic government is informing the international media is simply untrue. Iceland is no role model for unburdening debt-laden economies, she says. “The IMF wants everything to be wonderful here, to make an example of us; but we are not an example. And of course our government want to claim that everything is going so well.”
Interviewing Jón Sveinsson, a former taxi driver, Peter comes to the conclusion that much of this Arctic nation is heavily in debt and suffering deep depression.
Strangely, it was only last month that The Atlantic Monthly ran a feature on Icelandic happiness. Supposedly Iceland still ranks as one of the most joyful nations in the world. Dóra Guðmundsdóttir, Head of the Division of Determinants of Health in Iceland, told The Atlantic that, “the impact of the economic crisis on happiness in Iceland showed almost no decrease in happiness measures from 2007 to 2012.”
This does not tally at all with what Jón Sveinsson has to say: “Very many households in Iceland (somewhere around 30%), have a negative equity status, very often causing people to contemplate just returning the key and moving to Europe. There is a big problem. A mental, social, economical problem…There have been three long years of depression, mental depression with people also.”
Writer and activist Andri Snær Magnason concurs: “People are broken, you know. It takes a few years for people to go through these psychological traumas.”
As Agnes points out: “…we have not been creating any new jobs in this country so we have lost so many people to Norway, to Sweden. They had just given up. And therefore the government can claim very proudly the unemployment is only 4.6% now. I think approximately 10,000 people have left [the country].”
And understandably so, when there are no new jobs being created, when household debt is the way it is, and when, as RTT News confirmed this month, the price of grocery items has risen nearly 4% this last year alone.
So is there anyone benefitting from this “crisis” aside from the IMF?—or, as Jón wryly points out—those “who have sheltered their money.”
Apparently not quite everybody is suffering.
Sigurgeir Kristgeirsson, CEO of VSV, a fishing company in Vestmannaeyjar, explains that fishermen now receive double the salary they had before the crisis, as the króna is so weak, more of the actual fish processing is taking place domestically (which of course means more jobs).
Yet, even for the well-paid fishermen, there’s a dark cloud looming on the horizon. “Our future is terrible, absolutely terrible,” Sigurgeir sighs. “Because the government is increasing the tax on the fishing industry. If we don’t see this bill changed, in three years from now you’ll see 50–70% of the whole fishing industry bankrupt. This taxation will wipe out all the value of the fishing industry as a whole.”
And by now, most of us know about that planned VAT hike on Iceland’s growing tourism industry—a trebling of the tax rate would you believe!
So, tell me—anyone at all—what on earth are these politicians thinking? Just when they claim things are on the up and the IMF is blowing kisses across the Atlantic, they begin milking the very industries that are keeping the people in jobs.
Back to Andri Snær: “[In Iceland now], you will find this great distrust in politics, distrust in the media, cynicism towards institutions.” And as Jón says, it’s the common man who bears the brunt of Iceland’s massive debt. (If Bloomberg is right, all told it’s something like $85 billion.) “It creates anger and resentment towards our own countrymen. For example, a banker was knocked down in the street not long ago because he dared show himself.”
When Peter asks Iceland’s Central Bank Governor Már Guðmundsson if Iceland actually has anything to teach the battered countries of Euroland, he answers: “The lesson in terms of how to manage a crisis like this is that we should not make a ‘bailing out the bond holders’ some kind of a religion.”
I don’t know about you, but these seem rather bizarre words coming from the governor of the central bank of a debt-burdened nation. Now what exactly is Már recommending those European governments do? Oh yes, never mind the creditors.
As Peter rightly concludes: “Yes, there is life after disaster, provided you’ve got a plan.” And, ehem—what plan would that be? Anyone?