Minister of Fisheries, Agriculture and Economic Affairs Steingrímur J. Sigfússon has written an article for the Financial Times detailing what he sees as the “well established” turnaround of Iceland’s economy.
When the former ruling coalition of the Independence Party and the Social Democrats were driven from power in 2009 – and a new coalition comprised of the Social Democrats and the Leftist-Greens were voted in – Steingrímur was tasked with being the country’s Minister of Finance. Facing a massive deficit, failing banks, and foreign debt well exceeding available revenue, the outlook was bleak at best.
However, Steingrímur writes in his article, “Icelandic lessons in coming back from the brink”, Iceland chose economic policies of recovery that he believes other European nations could learn from:
The Icelandic government has pursued the politics of social and economic inclusion. Those on higher incomes have contributed more in absolute terms through the adoption of a progressive system of taxation, while those on lower incomes have been sheltered. Welfare services were cut less than other areas of public spending. The outcome has been as intended: a more equitable net income distribution. Purchasing power among lower-income groups has been better maintained than among those with higher incomes, enabling them o continue as active participants in the economy.
Steingrímur also credits the depreciation of the krónur, splitting the banks into old and new versions, and granting depositors priority over other claims on money within the banks.
“Policy makers and legislators in Europe should seriously consider whether it is not timely and sensible to incorporate an Iceland-style priority ranking into law,” he closes in part. “Recent comments reported in the media by George Osborne, the UK chancellor, give reason to believe that there is a growing recognition of the shortcomings of current regimes and perhaps even a will to take active measures to improve it. If that is the case then just maybe Iceland’s hard-earned lessons can provide useful guidance today for leaders in Britain and the eurozone.”