Germany Has Virtually Taken Over Greece & Italy-- Portugal, Spain & Ireland Are On The Rocks, So How Has Iceland Escaped Their Fate?

Greece is now the Sick Man of Europe-- and Turkey, thriving, has the right to be as happy as it is that they were never accepted into the Eurozone. And Spain, with its far right Austerity-über-alles new government, could well be the next economic catastrophe, a way bigger one than Greece. The debate, in fact, seems to be when Spain, with soaring unemployment and deepening recession, unwinds, not if. Meanwhile, though, the little island in the middle of nowhere, barely part of Europe at all, is recovering.

After the same axis of bankster-and-politician greed that wrecked the economies of the U.S. and Europe, devastated Iceland, the people took a more proactive policy than anywhere else, arresting politicians and banksters, putting them on trial, and nationalizing the criminal banking operations. Now those operations-- without the criminal banksters-- are coming back to life... while the U.S. and Europe are still being held captive by the same evil axis-- yes, even under Obama-- that caused such havoc and economic dislocation. Iceland learned the hard way what happens when the banksters dictate deregulation to bought-and-paid-for political hacks. And they let their banks collapse and default. "Today, Iceland is not only the first country to put its political leader on trial for the crisis but it also offers a test of the advantages of indebted nations simply letting their banks collapse and default on their loans... Some say it is the trial of the bankers, which began a few weeks ago, that will help Iceland shake off the demons of its financial crisis." Around 100 banksters and politicians will face trial. Meanwhile, unlike Europe, the country is well on the way to recovery.

Iceland’s banking sector is slowly beginning to emerge from the shadow of the 2008 bank crash that plunged the country’s economy into crisis, say senior industry figures.

New Landsbanki, one of the government-backed banks created after the collapse of Iceland’s financial sector, is likely to float on the stock exchange as early as next year, according to its chief executive Steinthór Pálsson.

The two other main new banks in Iceland-- Arion Bank and Íslandsbanki-- could also be sold to private investors as early as next year, according to their chief executives, in what will be a significant milestone on the path to the recovery of Iceland’s financial sector.

“There is still a long tough road ahead of us but we are beginning to return to something like normal,” says Mr Pálsson, at Landsbanki’s main branch in central Reykjavik. “We will most likely be listed next year and the government will start to gradually reduce its stake in the bank,” he adds.

All three new banks were created with the help of the government in 2008 to house the rescued domestic assets of the failed banks Kaupthing, Glitnir and Landsbanki. They are owned by the government and the creditors of the old banks.

The news of the new bank’s impending sale follows a largely positive assessment of the Icelandic banking sector in recent months by Fitch, the rating agency, and the International Monetary Fund, which both agreed that the sector is on much firmer footing than a year ago.

...The eventual sale of the three main banks, which the old creditors agreed would happen by 2014 at the very latest, will be a landmark moment in the torrid history of the Icelandic banking sector.

The bloated industry, which had assets 10 times the size of Iceland’s gross domestic product before the crisis, collapsed in 2008 bringing the country’s currency, government and much of the economy down with it. The island nation of 320,000 was forced to accept $10bn in loans from the IMF and others.

The success over the coming years of these new banks, which are one-fifth of their pre-crisis size and almost entirely domestically focused, will be crucial to Iceland’s burgeoning economic recovery. “We need successful banks to make this recovery work,” says Steingrímur Sigfússon, minister for economic affairs.

Regulators say the key challenge for the sector is the large number of non-performing loans and repossessed assets still on its books. About 70 per cent of corporate loans were foreign-exchange linked in 2007 and so the sharp fall in the value of the krona made many loans near-unpayable. Despite significant restructuring efforts, close to one quarter of the loans are non performing.

...Mr Pálsson says that even the Icelandic peoples’ frosty attitude to bankers has been starting to thaw. “Two years back it could be tough for our employees to be at a family gathering because people were complaining about the banks constantly,” he says. “Now the situation has changed and our employees can go to family gatherings without problems.”

Iceland is now debating whether or not to join the Eurozone. The Parliament seems about evenly split and it would have to go to a referendum, a referendum probably destined to fail.