I probably should have divided loyalties about Iceland's decision to get tough with its creditors. After all, the council I am a member of still has £2m tied up in the interminable legal process that always follows a bankruptcy, public or private. But I can't help rejoicing about the escape by the Icelandic people from the debts that their Viking traders pushed them into.
According to a recent Bloomberg article, Iceland's decision to allow its banks to default has done it very little harm - and a great deal of good:
'The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.'
Iceland has suffered economically, with a contraction of 6.7% in 2009, but was back to growth last year and is now growing more rapidly than the Eurozone.
The different with Greece is, of course, that it was part of the vast euro currency area, and so could not make decisions in its own national interest. That, and the fact that Iceland is a tiny economy (GDP of £13bn.) and so its people could never have been good for the debt. Greece, by contrast, has a large and skilled workforce who work harder than the Germans. That makes it good for the extraction of value, as do the tasty public assets which are currently being put into a firesale.