Miracle or not – the “kreppa” in Iceland is over (according to the statistics)
The recovery – or not – in Iceland has become a hugely popular topic for modern day learned querelles of economists. Is Iceland doing better than Ireland is a question that’s already been floating around for some time. And now, how does Iceland compare with the Baltic countries, which themselves have been branded as a miracle, especially Latvia. The latest ground for miracle contest – Iceland vs Ireland/Baltic states – is the Maurice Greenberg Center for Geo-economic Studies blog, on the Council on Foreign Relations website.
Back in July 2010 the question on the CFR website was Post-Crisis Iceland: Miracle or Illusion? The question was prompted after Paul Krugman had been writing on Iceland as the perfect solution for indebted EU countries. Krugman got his outcome by a clever choice of period to analyse. Now, CFR has revisited the question and conclude there is no miracle (with links to some articles on Iceland’s economic recovery).
Miracle or not, Iceland is doing pretty well. Here is the latest overview on Iceland from the IMF. The conclusion is:
Iceland is gradually emerging from its severe post-crisis recession. Domestic demand is driving growth and unemployment is declining, but inflation remains high. Imbalances are unwinding, but all sectors of the economy remain highly leveraged. The outlook is for a moderate recovery, but risks emanate from both external and domestic sources.
In a recent interview on Ruv, Gylfi Zoega professor of economics at the University of Iceland pointed out that the crisis in Iceland had come to an end. Icelanders may not quite notice it yet – and a crisis in euroland may derail it – but on the whole, economic key data in Iceland points firmly in this direction of “crisis over” – and growth has returned.
*Here is a recent Icelog from March on Ireland and Iceland.
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What a mess the banks left Iceland in. There was a time when the World blamed Iceland for all the problems, well Europe in particular. Never a moment went by before someone I spoke to had lost over half their savings with these corrupt banks many of which will never be able to recover in their lifetime. I am sure that the same goes for many Icelandic people as the world of fraud has no boundaries. We now see what Barclays bank and I am sure many more have done by fixing the LIBOR & EURIBOR again this will have affected people everywhere. When will this come to an end. At least Iceland have been big enough to investigate their own problems from within and can hold their head high in regaining their self esteem. Will the rest of the governments and regulatory authorities have the same courage.
Carian
5 Jul 12 at 9:33 am
Anorak alert: do not read any further if pedantic behaviour annoys you.
Sigrun, a little English lesson (that a great many journalists need to learn). The word “crisis” means a turning point, and often a dangerous turning point. It does not necessarily have negative connotations since it merely refers to a change of state from one form to a quite different form. In a medical crisis the patient either gets better or dies! A crisis cannot last for any substantial period of time.
So it is semantically obvious that Iceland’s crisis is over – it ended in October 2008. And it takes little effort to realise that the crisis left the country in a far worse state than before.
You are not alone in this. Badly trained writers – especially in economics – frequently refer to an “ongoing crisis”: this is a meaningless oxymoron.
Mike (UK Nordic analyst)
5 Jul 12 at 7:49 pm
Krugman has addressed the CFR criticism on his blog –
http://krugman.blogs.nytimes.com/2012/07/03/peaks-troughs-and-crisis/
Also: he has never said that Iceland is the “perfect solution.” What he has said is that because it had its own currency, Iceland had tools at its disposal that take not available to the EU nations, tied that they are to a common currency.
Rajan Parrikar
5 Jul 12 at 11:03 pm
Mike, I rather like anoraks, thank you. Would you then talk about “depression” instead of “crisis”? I translated the Icelandic “kreppa” with “crisis” – should perhaps rather be “depression”?
Sigrún Davíðsdóttir
6 Jul 12 at 7:03 am
Ah, “recession” would be the word, I guess…
Sigrún Davíðsdóttir
6 Jul 12 at 7:05 am
“Depression” sounds right to me; in theory the kreppa should be a once in a lifetime event. That said, it’s pretty clunky, but perhaps that’s because it’s not a commonly used term?
Bromley86
6 Jul 12 at 10:24 am
Re the semantics discussion re “crisis”: Both usages are correct. The English language being a living language, word meanings are meanings first and words after. For this words “change meanings”, or seem to assume new ones. the quotes and seeming are for the terms reverse referencing. In fact, word meanings come first and are assigned words that exist that seem adaptable to the new meanings.
First a neutral example: The word “halt” means “stop”. But it has also come to mean hesitant movement, giving us the halt with the lame. Both slowed, neither stopped.
While “crisis” does mean a point of nexus when a change occurs, it also is used to refer to a plateau of nexus (no there is an oxymoron!), where a “breaking point” is maintained “at breaking point”. George Orwell’s “1984” features a continued and continual ” crisis state” (pun intended), which is a paralysis and maintains paralysis. In the “real” world that has been created by the current and ongoing banking scandal situation (“scandal”, too, can be assigned more than one meaning in this usage), the bailings out of malefactor banks and the manipulatings of currency quantities and interest rates, in attempt to balance inflation against deflation, together with grantings of permissions and favors to depended upon and favored players, to prevent the normally quick and harsh market forces from playing through to end the “crisis” economic circumstances sharply, have perpetuated the crisis economic circumstances. In result we have had, and continue to have, an unnaturally long and ongoing teetering on the edge of a crash that, in the end, will not be prevented, but made worse, by the artificial balancing. The stretching of the crisis period only does more damage to the smaller and weaker, as the larger and stronger climb up on them attempting to escape. Consider a ship sinking analogy, with the rats scrambling, yet all still sinking. The present struggle is not for who might save themselves, but for who will be the last rat to drown.
Iceland abandoned the sinking ship, to continue the analogy. The kreppa/crisis of the scramble off and into lifeboats, or onto rafts, or to catch at flotsam is over, and the picking up who could be picked up, but the survivors are still at sea, still at mercy of the elements, in danger of storms, exposure, starvation, shark attacks, etc.
What is a word for “dangerous tedium”? The time when time hangs, when there is nothing but time, time to recriminate, to argue, to snap and snarl and make the situation, bad enough at best, worse? This became the new, the ongoing, crisis. The crisis Iceland still has to pull itself out of.
R.L.Dogh
7 Jul 12 at 2:16 am
Brilliant!
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