Interview with Iceland's Economy Minister 'We Reacted Immediately to Symptoms of Crisis'

In late 2008 and early 2009, all three of Iceland's major banks collapsed amid the financial crisis. Now, the country is experiencing economic growth once again and unemployment is falling. Economy Minister Steingrimur Sigfusson explains to SPIEGEL how it was done.

Icelanders protesting in 2009 in the wake of the collapse of several banks in the country.

Icelanders protesting in 2009 in the wake of the collapse of several banks in the country.

SPIEGEL: Four years after Iceland's banks collapsed, the country has managed to overcome its financial crisis. How did you do it?

Sigfusson: We haven't reached our destination yet, but we are on the right track. We have growth again: 2.7 percent this year and up to 3 percent next year. The unemployment rate is decreasing and above all the budget deficit has sunk from an unfathomable 14 percent in 2008 to about 1.5 percent in this year. In the upcoming budget we expect only 0.3 percent and in the year after a small surplus.

SPIEGEL: What can European crisis managers learn from the experience of your small country?

Sigfusson: We are not going to preach to Europe that we have found the cure all. But it was important that we didn't wait, but that instead we reacted immediately to symptoms of the crisis. In order to remedy the deficit, an increase in taxes to raise revenue was unavoidable, but savings measures were also necessary. We needed a mix of both and the strong conviction in preserving our welfare system.

SPIEGEL: What can you recommend to countries in crisis like Greece?

Sigfusson: First security for society. Then the lower and middle income classes must be protected from austerity measures. Their purchasing power must be maintained so that their consumption can contribute to the revitalization of the economy. Internationally that is often overlooked.

SPIEGEL: In the middle of the crisis, you wanted to lead Iceland as quickly as possible to the EU and the euro zone. And now?

Sigfusson: At the time, the willingness to join among the traditionally euro-skeptic Icelanders was high. Now the fear of Europe prevails again, especially when it comes to our fishing rights. Yet we haven't even talked to Brussels at all about the decisive acquis chapters regarding fisheries and food safety. For me personally, that is the real disappointment.

Interview conducted by Manfred Ertel


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mrjgoodyear 11/27/2012
1. Icelands Debt
How much do the Icelandic banks owe as a result of loaning money to investors who plundered European countries buying out and buying up good businesses which subsequently failed along with their banking/financial institution. How much, in the dollar, did they repay to those who had deposits in those banks. Greek should be allowed to get such great terms of debt restructuring. Iceland has no greater manufacturing, or service industry capacity, with which to recover, than has Greece-unlike Italy,Spain, and France.
BTraven 11/29/2012
2. *
Iceland's recovery has been a miracle given it's situation at the end for the world where the climate is harsh and therefore almost everything must be imported. Is fishing so lucrative? I can't believe it. Unfortunately, you don't find much how they had managed it in the media.
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