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Iceland’s prime minister breathes a sigh of relief that his country never joined the European Union.
“I am pretty sure our recovery couldn’t have happened if we had been part of the EU,” Sigmundur Davíð Gunnlaugsson said in an interview last week.
Gunnlaugsson argues that if his country’s application, made in the midst of an economic collapse in 2009, had succeeded, then Iceland might have suffered the fate of Greece, with its long-running economic collapse, or Ireland, which saw its public debt skyrocket as the government took on the bad debts of the banking sector.
“We might have even gone the other way and become a bankrupt country,” he said. “If all these debts had been in euros, and we had been forced to do the same as Ireland or Greece, and take responsibility for the debts of the failed banks. That would have been catastrophic for us economically.”
Instead, Iceland is a post-crisis success story.
After growing by 1.9 percent last year, the economy is expected to expand by 3.5 percent this year. National debt is down to 64 percent of GDP, falling from a peak of 86 percent in 2012, and making it back down towards the pre-crisis level of 37 percent.
Unlike most EU countries, as well as the U.S., Iceland has actually been jailing the bankers who grew the country’s financial sector to 10 times larger than the economy before the 2008 banking crisis that sent the broader economy into a tailspin.
Iceland today is a world away from the fraught days of 2009, when Gunnlaugsson’s predecessor, Jóhanna Sigurðardóttir, saw EU membership as a way of rescuing the country. [...]
Iceland suspended its EU bid in 2013, and Gunnlaugsson finally withdrew the country’s application earlier this year.
This month, Iceland repaid the last of its $2.1 billion loan from the International Monetary Fund — a legacy from Iceland’s main banks defaulting on a combined sum of $85 billion back in October 2008.
The finance ministry this week took steps to end capital controls. They were imposed in 2008 to prevent money flooding out of Iceland and worsening the financial collapse.
During the interview with POLITICO, Gunnlaugsson said he was relieved at the country’s extraordinary turnaround. He believes that if Iceland had been rushed into the European Union it could have been a very different story.
Crucial reasons for Iceland’s recovery were having its own currency, the krona, an independent legislation that gave the government more room to maneuver, and control over the country’s natural resources.
“Factors dealing with being outside of the EU have been essential in our economic improvements,” he said.
Iceland’s recovery has also been turbocharged by a rise in tourism. Visitors have risen by roughly 25 percent each year for the last four years as foreigners flock to see the Northern Lights and bathe in volcanic springs. [...]
Along with Norway and Liechtenstein, Iceland is part of the European Economic Area, which grants access to the EU single market while staying outside the EU’s governance structures.
“Our relationship with the EU, the model we have with Norway and Liechtenstein, through the EEA agreement, has worked for us,” Gunnlaugsson said.
Full article in POLITICO