Saving Iceland: government must take big moves right now

robert-wadeThe London School of Economics professor and Iceland expert, Robert Wade appeared on Iceland’s most popular political magazine programme Kastljos this week.

In the nearly 13 minute-long interview, Wade expressed his frustration that his (and others’) dire warnings on the Icelandic economy were not listened to over recent years. He said that the imbalances in the Icelandic economy had been bigger than almost anywhere else in the world, and that that was especially dangerous at a time when the entire world economy was entering a severe slowdown. “People, on the whole, were rather dismissive of (my) argument, saying that I was just being alarmist,” he said.

While Wade asserted that he supported the privatisation of the Icelandic banks in the first place, he described as “a mistake” the way the government went about the process, and the people who ended up in control.

“It’s not just a matter of what the rules are; it is also a matter of how the rules are implemented – or not implemented,” he said, claiming that the Financial Services Authority had acted more like the banks’ aide than their regulator.

With regard to the future, Robert Wade was adamant that the worst is yet to come. He foresees even higher unemployment and a time when pension funds feel the pressure to cut payments. He also believes that there will be another global tipping point (like the Federal Reserve’s decision not to save Lehman Brothers in September) some time between March and May.

It is Robert Wade’s opinion that the Icelandic government can effectively prepare for these shocks and set the country on the road to recovery by setting aside party politics and taking big steps right now, while there is still time. Whether they take his advice remains to be seen.

The interview can be seen in full in English here for seven days.

Comments are closed.