Posts Tagged ‘Competitiveness’

The Finance Minister Who Doesn’t Get It

Tuesday, March 9th, 2010

“I think what is happening in Iceland proves that our own currency is very beneficial to our needs. You don’t have to go far back to see that the currency developments have increased the competitiveness of Icelandic businesses and industries”.

- Steingrimur J. Sigfusson, Finance Minister of Iceland two years after an economic collapse all but wiped out the Icelandic financial sector after years of “hot money” flowing into the country because of exorbitant interest rates imposed to battle inflation.

He is crediting the arsonist for bringing a bucket of water to the fire.

What he is really celebrating is Iceland moving one step closer to the developing world and  improving our “competitiveness” through a worthless currency. Never mind the comparative loss of wealth to citizens in the developed world.

A classic argument for not joining the EU and improving the livelyhood of Iceland’s citizens.

Related posts:

  1. Thanks A Bucket – But Stiglitz Wants IMF Out Of Iceland
  2. Finance minister wants to abolish price-indexation
  3. UK Crackpot: McDonald’s flight shows Iceland’s policy works

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Posted in Iceland, Market | No Comments »

Lots Of Love For The Financial Authority

Monday, October 26th, 2009

From a speech given by Sigurdur Einarsson, Kaupthing boss at a conference held by the Financial Authority in January, 2005.

“…There is a reaction, in Iceland as in many other countries, to the corporate scandals that recently shocked the world, but adding more detailed regulations and penalties will not help against those who are willing to violate the law. Even in the United States of America, politicians have mistakenly introduced new laws that have resulted in less freedom, to the extent that USA is no longer on the top ten list over the most free business countries in the world.

…In my opinion, and that is an opinion I have formed after dealings with authorities in more than ten countries, the financial and regulatory authorities in Iceland and in Luxembourg are among the most effective.  That may come as a surprise to some of you, but I can support my opinion with some arguments. Here in Iceland as in Luxembourg you have up to now been able to reason with the FSA’s, get guidance and come to understandings where substance but not formalities have been in the
forefront. In that way you build up trust and confidence which is the core quality in all business dealings.

…Some people seem to think that the Icelandic FSA is not up to standards since it has not put any CEO’s or investors behind bars as has happened in the USA. In my view the right yardstick here is the financial strength and competitiveness of Icelandic banks and financial companies and the effective competition in the market. Considering these factors, the Icelandic FSA has done a great job.

…In general I think the tax authorities in Iceland would be more effective by reasoning with foreign investors as well as our big companies and – more in the style of FSA – guiding them to adapt acceptable procedures, rather than taking them to the courts. In Sweden Kaupthing bank encountered a negative attitude from The
Small Shareholders Association. A totally unfounded criticism, underpinned by slander and gossip exported from Iceland,

…In a small country as Iceland it’s also easy to get ones point of view across to the political decisions makers.

… My advice to all concerned with the ongoing success of the financial market in Iceland is this: Be business minded and think well and hard before introducing any new rules and restrictions into the country’s legal framework.”

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Iceland finance ministry reports crisis past its worst

Wednesday, May 13th, 2009

gea1The worst of the Icelandic kreppa (economic crisis) is potentially over already and better prospects can already be anticipated by the New Year. According to mbl.is, this is among the key points in an economists’ report published this week by the Icelandic Ministry of Finance introducing a national economic forecast for 2009-2014.

The economic forecast says that the country’s ability to adapt flexibly to new economic circumstances is strong. Real wages have decreased and the cost competitiveness of Icelandic companies is in good shape. Renewed demand from overseas will help business and support new job creation.

The forecast reiterates the importance of refinancing the banks as quickly as possible, and of lifting currency exchange controls, both in order to improve international trust in the treasury’s financial position. Households have been hit hard by the financial crisis, but 90 percent (presumably of homeowners, ed.) are still in paid employment. The report states that laws passed to help hard-hit families get over the worst of the crisis appear to be working. It is also important to loosen controls on the business environment and support investment to increase employment.

The Economy Office at the Ministry of Finance predicts that inflation in Iceland will be 10.2 percent this year and reducing quickly to 1.6 percent next year and 1.9 percent in 2011. The Office also predicts that unemployment will continue to increase to 9.6 percent next year, and will be roughly 9 percent this year before going down to 7.5 percent in 2011. These figures apparently include the potential employment created by a new aluminium smelter planned at Helguvik and the extension of the existing smelter at Straumsvik. If the projects do no go ahead, the Office expects unemployment to be 0.5 percent higher in 2010 and 1 percent higher in 2011.

The national economic forecast says that the Capital Adequacy Ratio (CAR) of the Icelandic housing stock has been around 60-70 percent in recent years but will fall to around 44 percent by the end of the year. Ministry of Finance analysts cautioned against panic at a press conference this week, saying that early indicators point to a rapidly improving economic picture in the New Year, leading to an increase in the CAR.

On the other hand, they also reiterated again the need to assist families experiencing the worst problems paying their housing costs.

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Posted in Iceland | No Comments »