The global crisis has brought many countries to their knees, none more so than the small island of Iceland whose losses amount to seven times its GDP. Yet while Iceland’s recovery has in many ways been remarkable, this column argues that the country’s capital controls stand in the way of further progress.
Following the collapse of Lehman Brothers in 2008, the first country to freeze was Iceland. Within a week in early October 2008, Iceland‘s three main banks, all private, accounting for 85% of Iceland’s commercial bank assets, crashed. The remaining 15% of the banking system caved in shortly thereafter. Figuring prominently among the factors behind the crash were incompetence, corruption, and criminal misconduct as is clear from the 9-volume, 2,400-page Special Investigation Commission Report of 2010, commissioned by parliament (see Gylfason 2010). Under new, capable management, the Financial Supervisory Authority of Iceland has referred 66 cases involving more than 100 individuals suspected of breaking the law to the Special Prosecutor‘s office whose staff expanded from 3 persons 6 months after the crash to 70 persons today, soon to become 80.
Πηγή: Project Syndicate