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Iceland’s Retreat from Financial Markets

The 2008 collapse of Iceland’s grossly overextended banks added fuel to the conflagration in global financial markets and wreaked havoc with the country’s economy, which at one point saw its stock market lose 95 percent of its value and its unemployment rate rise above 25 percent. Since then the economy has recovered, the country’s unemployment rate today stands at just 2.5 percent, and the government recently paid back a $2.5 billion IMF loan. However, last spring the government announced it would impose a haircut on its foreign bondholders, threatening its access to financial markets and endangering its strong economic performance of the last few years. The island’s October 29 election solidified the Pirate Party’s presence in government and may result in a new ruling coalition that is ambivalent — or hostile — towards market economics as well as any commitments made by its predecessors to investors or trading partners. Our panelists hope to shed some light on what Iceland’s future will hold and what that means for U.S. policy and global finance.

Featuring
Ike Brannon
Senior Fellow, Jack Kemp Foundation, and former Cato Visiting Fellow
Mark A. Calabria

Former Director, Federal Housing Finance Agency; Former Chief Economist, Vice President Mike Pence; Senior Advisor, Cato Institute