An economist says that Fitch Ratings’ downgrade of Iceland into junk territory is “purely symbolic,” with no real meaning beyond that.
As reported by the Wall Street Journal, “Fitch Ratings moved one of Iceland’s key ratings into junk territory after the country’s president vetoed a bill that would reimburse the U.K. and Netherlands for bailing out depositors of a failed Icelandic bank.”
However, economist Jón Daníelsson of the London School of Economics told Vísir that the move was merely a symbolic move.
While he points out the the rating would get in the way of the government being able to take loans, that it isn’t taking any loans at it is. Also, if it had defaulted on Icesave, it would have been put in the junk category anyway. But as the government still does intend to re-pay the Icesave debt, “the rating has no meaning beyond a symbolic one in the short term.”
Daníelsson recommends that now is the time for multipartisan cooperation in re-negotiating with the British and the Dutch. Such an effort, he argues, would boost investor confidence in the country again.
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