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Long, bleak winter for Icelandic economy

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Long, bleak winter for Icelandic economy

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Construction has ground to a halt in Reykjavik, a result of the financial turmoil that plunged Iceland into crisis last autumn. Many building sites could remain unfinished for a decade. The building sector was one of the first victims of Iceland’s banking meltdown that put the country of the verge of bankruptcy.

October last year, Prime Minister Geir Haarde unveiled a series of crisis measures to save Iceland’s banking system. Seven months later, having gone cap in hand for an 8 billion euro loan led by the IMF, Iceland’s economy is in a slump. The rate of unemployment is running at 9 percent — rocketing from its normal levels of between 1 and 3 percent. Inflation is also more than 15 percent. The IMF has forecast Iceland’s budget deficit to balloon to 13,5% of GDP this year, while the economy is also expected to contract by a tenth. A grim outlook for many Icelanders who have seen their mortgages double. Like Anna Benkovic Mikaelsdottir, a single mother and teacher soon to be made redundant because of government austerity measures. Anna said:“Of course the price of everything has gone up but the wages are status quo. It affects everybody, in a little way maybe, or a big way like me. Like I have to freeze my currency loan regularly. But that’s a short term solution.” With many people feeling the squeeze, the idea of leaving the country is gaining ground. Harpa Bjarnadottir said:“I love Iceland and have always lived here and want to stay here in the future, but if politicians don’t do anything about unemployment so it starts to go down or create more jobs one will be forced to emigrate. That is how things are.” With Iceland’s once robust banking sector all but melted, the country is relying on other forms of income, namely fishing and aluminium exports, but even these sectors have seen huge drops in international prices.