Iceland on mend in spite of refusal to bail out banks

ICELAND’S decision not to bail out its banks and to use state money to help hard-pressed households and lower income groups has left it in a much better place than Ireland, according to two Nobel prize winning economists and IMF experts.

A report from the IMF that lent the country $2.1 billion said that Iceland is experiencing a moderate recovery, unemployment is declining and the government was able to return to the capital markets earlier this year.

The fund, which is lending €22bn to Ireland, said that Iceland’s unusual policies provide a good test case. “Iceland set an example by managing to preserve, and even strengthen, its welfare state during the crisis,” said IMF deputy managing director Nemat Shafik.