The Nobel Prize winning economist Joseph Stiglitz appeared yesterday on Icelandic television to discuss his take on the IMF involvement in the country and the future development of the Icelandic economy.
On the Silfur Egils political talk show on RUV, Stiglitz, who is known as a fierce critic of the IMF, said the Fund has largely been fair to Iceland so far.
He praised the IMF for allowing Iceland to retain a good level of political freedom to run a high deficit and maintain its capital controls.
Looking to the future, he said: “They may encourage you to lower your capital controls too rapidly, which would force higher interest rates and force up unemployment”. The IMF could also force the economic deficit to be reduced too quickly, which would severely squeeze the healthcare and education sectors and the welfare system – all of which Stiglitz refers to as “assets” worth maintaining.
“Maintain the strength of the economy first, because assets are still in Iceland; that hasn’t changed. It’s just a question of who owns them now,” he said.
On the controversial subject of potential debt relief, he said across the board debt forgiveness is not an option because it treats the wealthy debtors who abused the system the same way as it treats the poor citizens sold faulty loans by abusive banks.
“We shouldn’t force citizens to pay for the mistakes of the banks in giving inappropriate loans. They sold a faulty product without properly informing people,” he explains.
The whole interview can be watched online in English, here (for two weeks only).
Stiglitz said, when asked, that he has been in contact with members of the Icelandic government and indicated that he would potentially be open to working for the government in an advisory capacity.