Last week, we had the tale of two countries.
One country, Iceland, apparently did ‘everything wrong’ by defaulting on its bank debt and increasing government spending as the people of Iceland saved. Iceland told the International Monetary Fund (IMF) to back off until it was ready to do a deal. It also put the bank deal to a referendum.
The other country, Ireland, allegedly did ‘everything right’ by promising to pay everyone every red cent and imposing huge austerity measures on its people.
We handed over the keys to the IMF without even taking a vote on the details of the plan.
When the vote is taken this week, we have already been told we can’t renegotiate any of it, so the next election – from a macroeconomic point of view – is academic.
What is the result of these different paths? Last week, Iceland cut its interest rates to 4 per cent. Its crisis is over.