In light of yesterday’s NO vote on the Icesave referendum and the apparent belief that this may close Iceland’s credit lines and send it back into the Stone Age, it is high time to put matters in perspective.
First, Iceland has a very high level of education. Second, unemployment is lower here that in many EU regions. Third, it has natural resources that can only increase in value. Fourth, it is better equipped to yield returns on investment capital than many other regions, especially after the Icesave vote. Fifth, it is strategically located both in terms of trade and military.
A quick look at Eurostat data outlining General Government Debt reveals that Ireland, Greece and Spain are in bad shape. Unfortunately, data does not extend to 2010 which would be very useful. When looking at General government debt to GDP (2009 figures; matters are probably even worse now), we find that Iceland measures 9.1% against 15.4% for Greece, 14.4% for Ireland and 11.1% for Spain. The sheer amount of debt in Italy is mind-boggling and the accumulated debt growth rate for all five PIIGS regions (Portugal, Ireland, Italy, Greece and Spain) is staggering. Fortunately, Iceland dodged that bullet, at least for the time being.
General government debt per capita reveals that each Irish owed around € 23,422 2009 whereas minimum wage was € 17,542 (debt 1.3 times higher). For Spain, minimum wage is around € 8,400 and debt per capita 12,232 or 1.5 times higher. Portugal, debt to minimum wage is 2.0 times higher and in Greece 2.8 times higher. Is there any wonder the people of these regions are getting aggravated? Another way to look at this is to divide debt down on enterprises, which results in the following list (enterprise total as of 2008):
- Greece: € 136,122
- Ireland: € 435,749
- Italy: € 318,059
- Portugal: € 64,101
- Spain: € 128,268
This kind of situation leads to high unemployment levels and sets off the vicious cycle of decreased consumption, bankruptcies and layoffs. Iceland dodged a bullet by gunning down the Icesave referendum and is able to move forward on its own terms. Liquidation of Icelandic banking assets in the UK and Netherlands will be more than sufficient to cover most or even all outstanding claims arising from Icesave which makes the country a very strong investment target. Sophisticated investors realize this and are looking toward making serious returns in this country which has a lot to offer in the global arena.
The future for Iceland is bright relative to other EU and non-Eu regions.