Tag Archives: Iceland Financial Crisis

Iceland, Economy, Happiness and Statistics

Iceland Cover

My first trip to Iceland was in 2007 when the country appeared to be riding the crest of an economic  wave, top of the United Nations index on human development and according to a study at Leicester University the fourth happiest place to live in the world.

Iceland had one of the richest economies in Europe, but it had a problem nagging away below the surface of the wave because its three main private sector banks had become so large that their assets amounted to more than ten times the gross domestic product of the country and eventually things went spectacularly wrong.

The economy bombed, the krona has lost more than half its value.  GDP dropped by 10% (I am not an economist but apparently that is quite a lot) in under a year and unemployment hit a forty year high.  Following negotiations with the International Monetary Fund a massive rescue package of $4.6bn was agreed by a combination of loans and currency swaps from Norway, Sweden, Finland and Denmark.  In addition, Poland offered to lend $200m and the little Faroe Islands offered 300m Danish kroner, which was roughly the equivalent of the United Kingdom lending 300 billion Danish krona or 35 billion pounds!  How generous was that.

Six years previously I had found the country horrendously expensive but that turned out to be a bit of bad timing  because immediately after the crash and only a year later the krona lost fifty percent of its value against the Euro.  Even taking into account six years of relatively high inflation, which even now remains stubbornly high at over 5%,  I was rather hoping for cheaper prices this time because it has now dropped to only the nineteenth most expensive country in the World to live in.

1000 krona

You would think that this would make people happy but evidently not because from fourth happiest in 2007 it has plummeted to eighty-eighth in 2013 and from the top of the human development index it has dropped to only fourteenth but remains in a top twenty which interestingly includes all of the other Scandinavian countries, Norway, Sweden, Denmark and Finland.

On the positive side and despite losing its happiness crown in 2013 the World Economic Forum named Iceland as the World’s most visitor friendly country just ahead of New Zealand and Morocco (Morocco?) .  The least friendly country by-the-way was declared to be Bolivia followed by Venezuela and then Russia.  Well, in my personal experience (and that is all that  it is) I certainly wouldn’t put Morocco in the top three and I certainly wouldn’t place Russia  in the bottom three either.

Other facts that might make Icelanders sad is that it is the only northern European country not to win the Eurovision Song Contest  despite competing in twenty-six competitions and it has never qualified for the football World Cup finals or the European Championship finals.  On the other hand it does now have three blue flag beaches  and four blue flag marinas.

The weather was a bit of a surprise because we had interpreted ‘Ice land’ rather literally and were expecting sub zero temperatures, snow and lots of ice.   What we hadn’t taken fully into consideration was the effect of the gulf-stream that delivers warm water from the Caribbean directly to the south of the country and thereby keeps the temperature unexpectedly mild.

Reykjavik is on a line of latitude 64° north which is approximately the same as Anchorage in Alaska and Arkhangelsk in Russia but whilst the average October temperature in these two cities is about -10° centigrade in Iceland it is generally a degree or two above zero.  Whilst you wouldn’t step out on the streets in Anchorage or Arkhangelsk without a warm coat, woolly mittens and a flask of hot soup it really wasn’t absolutely necessary here.   Iceland it seems is a most inappropriately named country.

Iceland Landscape

When we arrived it was dreary and overcast but to be fair there was now some weather improvement and although there were still impenetrable steel grey clouds it had at least stopped raining.  It was only a short walk to the seafront and we found our way to the promenade and walked along to the Sólfar Suncraft, which is a stainless steel 1986 sculpture of a Viking long boat that occupies an impressive spot overlooking the bay and Mount Esja on the other side. 

Iceland is proud of its Viking heritage because the country was first colonised by Norwegians in the ninth century and the story goes that the first permanent settler was a man called Ingólfur Arnarson who landed here in 871 and named the location Reykjavik, which means smoky bay, on account of the comforting plumes of hot steam that were escaping from the nearby hot springs.

By early afternoon there were some promising pools of blue sky spilling through the clouds as we walked back from the sea and into the city centre and along the main shopping street of Laugavegur.  We were ready for a break so we stopped at a small café that we recognised from the previous visit and where on that occasion a coffee and a sandwich and a cake came to a very unreasonable 1,600 krona, or about £13 but this time it was way cheaper for four of us at about only £8 and I began to feel more comfortable about Icelandic prices.

Sólfar suncraft Reykjavik Iceland