The article Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says talks about how Iceland has avoided the trouble that Ireland is facing.
“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”
Kaupthing Bank hf, Landsbanki and Glitnir Bank hf failed within weeks of each other in October 2008 after they were unable to secure short-term funding. The banking crisis led to an 80 percent slump in the krona against the euro offshore, until the slump was stemmed by the introduction of capital controls at the end of 2008.
For more on this issue than is in the Bloomberg article see the interview with Iceland’s Prime Minister.
Perhaps this article and interview provided the basis of some of what Paul Krugman wrote in yesterday’s column, Eating the Irish.