Published December 8, 2011

It looks good on the plate, but something simply doesn’t taste right.
Much of the international media is hailing Iceland as an example of how to squeeze through the crisis tunnel and come out the other side grinning like a Cheshire Cat. As SPD candidate George Kerevan points out in his Scotsman article from November 25: “…this week, it was the ultra-orthodox Germany that the fickle bond markets turned on. In Reykjavík they have a right to smile…”
So should we all be guzzling champagne with our defrosted chicken?
An early November AFP headline reads: “Key lesson from Iceland crisis is let banks fail.” Three weeks later, the Financial Times (FT) runs with: “Iceland: out of the deep freeze,” and then there’s a whole host of ‘Occupy Wall Street’ blogs trumpeting Iceland as the only place in the world where citizens have made a real difference. The ever-optimistic Birgitta Jónsdóttir points out in her Guardian article on November 15 that it will be, “up to the 99% to call for a national vote…so that we inside the parliament know exactly what the nation wants and will have to follow suit.”
Sounds fantastic, but will it really make a difference when the Icelandic court system rules against the people? In the words of the FT: “Iceland will now repay the Dutch and British government for money spent compensating personal deposits—despite an Icelandic vote in a referendum in April to block the compensation deal.”
And where on Earth is the media getting its facts and figures?
The Scotsman proposes, “Iceland’s export surplus is growing like the clappers. Hence the reason Standard & Poor’s says it is safe to invest in Iceland again.” On the other hand, a more cautious Reuters whispers that, “two key problems to Iceland’s growth are that domestic demand is flatlining and exports, despite a depreciation in the value of the crown [sic] are basically unchanged compared to 2008.”
You tell me? To coin an Icelandic knitting metaphor: Who’s spinning whose yarn? Could it be that there’s politics at work here? In the media? Heaven forbid!
Shouldn’t we be grateful for the FT’s healthy scepticism: “Iceland has a long way to go before it becomes a pin-up for post-crisis recovery…private sector investment is only about half the level it was in 2008, while public sector investment is falling.” And little brother Reuters concurs: “…the government and the creditors of the collapsed banks own the new banks. This distorts the allocation of capital, with banks unwilling to lend to businesses other than their own.”
But I ask you. Who really owns the banks?
The only reason that unemployment figures are presently just below 7% is because, in the words of Reuters, “a large number of companies, which are being kept in business only because they are bank-owned, would go bust. Unemployment, down from a peak of about 10 percent to six percent, would start going up again.”
The ever-cheerful AFP says: “After three years of harsh austerity measures, the country’s economy is now showing signs of health despite the current global financial and economic…” Paul Krugman, the US Nobel-laureate economist told the AFP that Iceland has its krona to thank for the speedy recovery. “In Iceland, the government was actually in a sound position debt-wise before the crisis.” Doesn’t that make you want to shake Mister Haarde’s hand?
On the other side of the Richter Scale, Michael Hudson, everybody’s pessimistic US economist, points out in an interview with GRTV, that “since the last census a few years ago, 8% of Iceland’s total population has had to emigrate to avoid the debt plunge…Most of the Icelanders of working age have left for Norway and other countries in order to find work. The situation in Iceland is becoming as bad as it was in Latvia…where they’ve forced one third of the population to plan to emigrate in the next few years. The approval rating of the Icelandic government by its people is reported to be 10%. That’s even worse than the US approval rating of congress.”
From the sidelines, Reuters adds that the “[Icelandic] government recently said it was focused on export-driven growth, but its plan lacks detailed measures,” and according to the FT, one reason why investments are not being stimulated is because “capital controls remain in place. Removing them could boost activity, but the omens are not good.” Apparently we shouldn’t hold our breath. “The last time Iceland introduced capital controls, in the 1930s, they were not lifted until 1993.”
A little further into his GRTV interview, the enigmatic Michael Hudson makes a tragic ‘whoops’ mistake. He says that Iceland has a population of 800,000 people. Well, if only he were right—unless there are 500,000 individuals mingling with the Huldufólk (the hidden people).
Of course I know that success stories are relative, and numbers can be adjusted according to (nudge nudge) variables. I don’t want to finger-point, but there should be all manner of MBA number-crunchers on hand who are quite fey in presenting long-term debts as assets…
Well, I guess I have no choice but to eat my attractive yet weird-tasting chicken and see how I fare in the morning. Here’s a little secret: Much of the frozen chicken for sale in Iceland isn’t even Icelandic.
Just ask Mister Strauss-Kahn of the IMF (cluck cluck).