Four years after the collapse of Iceland's three largest banks, the island republic in the north Atlantic is booming again with strong growth. It also has low unemployment, a balanced national budget for 2013, and it is speedily repaying its foreign debt. The economic development is "really, really good," economist Olafur Isleifsson says.
Yet when a visitor asks people in the cafes of Reykjavik about the meaning of the recovery for the average Icelandic family, responses range from cool to bitter. "What good does all that do to those who will never be able to repay their own debt," sighed IT technician Hallgrimur Ingolfsson. The middle class of the country of 320,000 residents collapsed in the autumn of 2008 along with the three largest banks.
Many had financed real estate purchases, four-wheel cars or far-off travels with credit in foreign currency. When the bank crash halved the value of the krona, the debts doubled. "Many lost all their pension savings, while others were evicted or are trapped with apartments" purchased on credit, said Isleifsson, a researcher with the University of Reykjavik.
Such people feel that gradually repaying their debt is like "shovelling into a black hole," Isleifsson says. On top of that, Icelanders had to cope with cuts in public spending and in salaries. However, one man's suffering is another man's opportunity. "Our order books are full again. The devaluation of the krona really helped a lot," said Karl Asgeirsson of the fishing equipment suppliers 3xTechnology in the small town of Isafjoerdur on the north-western coast.
Kristjan Joakimsson, from the nearby fish processors Hradfrystihusid Gunnvor, cited "the mood of nature" as another reason for the upswing. "The cod is back again. And abundant mackerel stocks off our coasts have helped us a lot," Joakimsson says. Tourism profited even more from the halving of the krona and it could soon overtake fishing as the most lucrative economic sector.
Tourists are streaming into the thinly populated country, which boasts impressive landscapes. The industry grew 15.7 percent in 2010 and 6.1 percent in 2011. "You can afford Iceland now," said Erna Hauksdottir, a representative of tourism professionals. The aftermath of the Eyjafjallajoekull volcano eruption in April 2010, when an ash cloud forced the airline industry to shut down for weeks over most of Europe, has been a paradox.
"At first, the phone stopped ringing because no one wanted to come any more. Horrible. But then the attention from the volcano drastically increased the interest in our country," Hauksdottir says. Despite his own success, fishery boss Joakimsson sees things in a mixed light - a view many Icelanders share. "The mood is pretty gloomy. But we have overcome many crises in the past," he says.
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