THE INDEPENDENT: Iceland was a pioneer in recklessness during the credit boom. And now the small nation in the north Atlantic is a pioneer in political accountability during the credit bust. Geir Haarde, the Icelandic prime minister between 2006 and 2009, appeared in a special constitutional court in Reykjavik yesterday on charges of “failures of ministerial responsibility” during the 2008 financial meltdown. But there is an irony here. For the economy that Mr Haarde helped to wreck has fared surprisingly well since the bust. Iceland experienced one of the most severe recessions in the world when the markets crashed in 2008. Economic output fell by about 12 per cent over two years. But the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016. So how did Iceland manage it? There were four pillars to Icelandic policy in the aftermath of the bust: external assistance, debt repudiation, currency depreciation and capital controls. MORE
NATURAL NEWS: The initiative came about following protests by Icelanders in 2008-2009 who were angry at the country’s leaders and bankers for its fiscal and economic collapse. At one point, protestors gathered around the Parliament building and pelted it with rocks. In the ensuing months, Iceland banks have forgiven loans equaling 13 percent of the country’s annual gross domestic product, which has eased the debt burden for more than 25 percent of Iceland’s population, according to a February report published by the Icelandic Financial Services Association. Iceland’s slow ascent out of the economic abyss began in 2008, following an $85 billion default by the country’s banks. Its economy in 2012 will surpass that of the entire euro zone, as well as the developed world on average (including the world’s largest economy, the United States, whose economy grew at an anemic 2.2 percent in the first quarter of this year), according to an estimate by the Organization for Economic Cooperation and Development (OECD).W ithout the agreement, homeowners would have succumbed to their debt after the ratio of obligation to income skyrocketed to 240 percent in 2008. Iceland’s $13 billion annual economy 
declined 6.7 percent the following year, in 2009, but has since rebounded and will expand by 2.4 percent this year and in 2013, the OECD estimated. Meanwhile, in the rest of debt-ridden Europe, the economy will collectively expand by a paltry 0.2 percent this year and only 1.6 percent the next, OECD estimates said in November. Housing is now just about 3 percent below values in September 2008, just before the financial collapse. So improved is the nation’s economic and fiscal outlook that Fitch Ratings in February raised the country to investment grade with a stable outlook, stating the country’s “unorthodox crisis policy response has succeeded.” A new leadership coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir that was voted into office in early 2009, has authorities looking into who was most responsible for the banking meltdown. And parliament is still weighing whether to move forward with an indictment brought against former Prime Minister Geir Haarde in 2009 for his role in the crisis. A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown. In all, a special prosecutor has announced that as many as 90 people may be indicted, while more than 200 others, including former chief executives of the country’s three largest banks, will face criminal charges. In the U.S., meanwhile, no top bank executives or lawmakers have faced prosecution for their roles in the subprime mortgage meltdown. MORE