Iceland Emerging, Says Krugman - The Reykjavik Grapevine

Iceland Emerging, Says Krugman

Published June 14, 2012

Nobel Prize-winning economist Paul Krugman contends that Iceland is emerging from the global economic crisis, due to taking an approach involving multiple solutions.
As reported, Iceland’s unemployment rate is currently at 5.6% – down a percentage point from last month – ranking well below the 11% European average and the American 8% average. Writing on his blog, economist Paul Krugman contends furthermore that Iceland is emerging from the global economic crisis.
Krugman points to an article from the Financial Times, which points out that “the Icelandic central bank has just decided to push up rates by 25 basis points to combat signs of inflation amidst ‘robust’ domestic demand.” The Financial Times argues that this success can be attributed to “sharp cuts in state spending, capital controls and a currency unit called the Krona”, implying that the euro would have held the economy down.
Krugman also points to data from Statistics Iceland, showing the GDP rising higher than it has been since late 2008 and climbing.
“GDP is still below previous peak,” Krugman writes, “but I think one could argue, much more so than in say America, that a significant part of that peak involved a Ponzi financial sector that isn’t coming back. I think I was one of the first outsiders to notice that Iceland’s heterodoxy was yielding a surprisingly not-so-terrible post-crisis outcome. And yes, the recovery is better than Estonia, and much better than Latvia.”

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