Sigrún Davíðsdóttir's Icelog

Scotland in a league with Iceland? Not too bad

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Scots against separation from the United Kingdom have launched a cross-party offensive against the surge for independence, driven by Alex Salmond and the Scottish National Party. One of those working against the SNP plan is Alistair Darling Labour’s former Chancellor of the Exchequer.

This morning, Darling presented his views on these matters on the BBC Today programme. In the end, Darling said Salmond had run out of ideas in terms of countries to compare an independent and thriving Scotland with. “You will find that Iceland and Ireland with which he used to compare us are now off the list,” said Darling.

Darling might have a case in Ireland but he doesn’t seem to have followed the trajectory of Iceland since the bank doomsday in October 2008, when then Chancellor Darling was quicker to react than Icelandic authorities and put Landsbanki and Kaupthing out of their misery. After much furore in Iceland, Icelanders have come to realise that the Icelandic banks didn’t fail because of Darling’s action driven by British and international envy over the banks’ brilliance. No, the Icelandic banks dug their own grave and are now under investigation in Iceland and the UK.

But that is the past. As a steady trickle of articles show, Iceland is now a favoured example of a country that took a huge hit as its three main banks failed, had its own currency to devalue, wiped out bad debt from the big banks by letting foreign creditors shoulder the losses and is now enjoying an enviable growth rate of 2-3% of GDP. (Here is an earlier Icelog, comparing Ireland and Iceland.)

Iceland isn’t a shining example in all respect but it’s done the national economy and the national psyche a lot of good to let failed banks expire instead of throwing good money at them to hide bad debt. Unfortunately, the UK Chancellor at the time didn’t use his influence to have the operations of banks needing public salvation thoroughly scrutinised – which is why the British know a whole lot less about the operations of the banks they are supporting than Icelanders do of their failed banks.

*Here is an interview with Darling on his dealings with the Icelanders in autumn 2008, excruciatingly unflattering for the Icelandic authorities at the time but largely supported by the SIC report.

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Written by Sigrún Davídsdóttir

June 25th, 2012 at 7:30 pm

Posted in Iceland

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