Word: iceland
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Dates: during 2000-2009
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...Icelanders - from cab drivers who recite economic statistics to Prime Minister Geir Haarde who travels the world calming investors' nerves - the hysteria appears overblown. "What you'd expect to see out of these windows is fire," says Finnur Oddsson, managing director of the Iceland Chamber of Commerce. Instead, he peers out at a $138 million construction project at the University of Reykjavik. Iceland, he points out, has been in this situation before. In early 2006, credit agencies criticized Icelandic banks for their lack of transparency and reliance on international capital markets. Analysts' opprobrium drove the krona down by 25% against...
This time around, the government and the banks are doing everything they can to dismantle the caricature of Iceland as a victim of its own excess, and instead portray it as the target of a financial conspiracy. Prime Minister Haarde has accused international hedge funds of deliberately spreading rumors to create a banking scare, so they could profit by "hook or crook" from wagers that the currency or stocks would tumble. In April, Iceland's Financial Supervisory Authority launched an investigation into an unconfirmed story that back in January, hedge-fund managers had hatched a plan to bet against...
...Iceland gets some support for its conspiracy theory from Richard Portes, an economist at the London Business School. In March, after he published a favorable report on Iceland's economy, Portes says a senior figure at a major hedge fund phoned him. "He spent half an hour trying to tell me the Icelandic banks were in terrible shape and that the country was a disaster area," he recalls. "Apparently I was risking my reputation by saying anything different." But not everyone responds to Iceland's plight with sympathy. Eileen Zhang, an Iceland expert at ratings agency Standard and Poor...
...point. Prior to the 2006 crisis, analysts warned that Iceland - where Land Rovers and private jets seem to outnumber the nation's 308,000 people - was growing too quickly, and that excessive consumption would cause the economy to overheat. Yet the nation's three largest commercial banks - Kaupthing, Landsbanki and Glitnir - continued to exploit their then strong currency and cheap credit to buy banks in Denmark, Norway and the U.K., as well as British retailers like House of Fraser and Moss Bros. They amassed foreign assets equivalent to 800% of the nation's GDP, the highest ratio of any country...
...restore investor confidence, Icelandic banks and government officials have emphasized their economy's unflagging strengths in a charm offensive directed at ratings agencies and investors. Iceland is the fifth richest country in the oecd; the prices of its largest exports, aluminum and fish, are at record highs. "The Icelanders are richer than us," says British economist Portes. "They're not exactly going to starve." (Iceland's gross national income per capita is $39,400, compared to the U.K.'s $35,300.) What's more, the banks remain fundamentally sound: they have strong deposit ratios and are more profitable than their...