Iceland’s unemployment rate has fallen to 5%. The country has maintained its social cohesion and prevented the wastage of job skills. It has lessened “hysteresis” damage of deep slump on the supply-side economy. The crisis strategy allowed the exchange rate to take the hit (36% trade-weighted devaluation), not the work force. Iceland has recovered its investment grade credit rating of BBB-. The economy grew 2.6% last year (IMF) and should achieve the same again this year. Interestingly, the GDP recovery in Latvia is in many ways comparable. Congratulations to both of them. What the two countries have (and Greece, Portugal, and Spain do not have) are open economies.

(Dr. Benny Peiser)