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‘Iceland proved there is a way of dealing with financial crisis in isolated country’

Iceland has been praised for its handling of the financial crisis, during which politicians allowed banks to fail, rather than bailing them out. Economic expert Margaret Bogenrief explained why in the case of the EU the solution is unlikely to help.

Iceland is ready to head to the polls for the country’s second presidential elections since the country’s 2008 banking collapse, and there are fears that those responsible could once again be voted into office.

Margaret Bogenrief, a co-founder of the financial advisory ACM Partners, told RT about Iceland’s political situation, and whether the small nation should be held up as an example for other debt saddled countries.

RT:Why do you think the political parties that brought Iceland to the brink of disaster are now regaining popularity?

Margaret Bogenrief: Because I actually think people are reacting less to being drawn to those parties and more to the years of austerity that they’ve had to endure since 2008. I mean, really what you’re looking at politically is pretty common not just in Iceland but around the world. Typically you have one party or group that creates or exacerbates an issue, another party is then brought in to correct that issue, and that party or group is then punished for the after effects of the correction for that given issue. That’s really all you’re seeing in Iceland.

RT:In Iceland, it’s kind of a small community. People know each other, and by putting people before banks Iceland proved that there’s another way of dealing with the financial crisis. What’s stopping other debt-ridden countries from following in their footsteps and doing the same?

MB: For the exact reason that you said, Iceland is a very specific country. I think it’s very important to note that it’s less integrated with Europe, and countries within the European Union. Iceland is a very specific case, and it’s a case that illustrates that there is a way to correct these issues when there’s an isolated country and an isolated community, but you generally just don’t see that right now in the global economy.

RT:Does it help that Iceland is not a member of the EU or even the Eurozone?

MB: Absolutely. The country is less tied to other countries, it’s an isolated community, people there have a much tighter sense of “what I do affects my neighbor, what my neighbor does affects me.” It’s almost as if a city within the United States was trying to correct something, that’s much easier to do with a much smaller, much more isolated country.

A man holding a crossed European flag, demonstrates in central Reykjavik during the weekly protest on November 22, 2008. (AFP Photo / Halldor Kolbeins)

RT:If you take a step back, rewind if you will, in 2008 Brussels threatened Reykjavik saying relations would be damaged if it refused a bailout from EU countries. Iceland blocked that move, so now, are the relations as bad as the eurocrats had warned in that particular situation, or are things pretty much normal?

MB: Well, frankly I think the eurocrats have a lot bigger things to worry about now than Iceland. I think ultimately what the Icelandic example proved to both the economic and political world is that ultimately results trump. And Iceland is now at this point not an entirely healthy country, but it’s healthy enough. And frankly, I don’t think the Eurozone is really in a position to say we won’t do business with you, we don’t want to work with you, we don’t respect you. The Eurozone has a lot bigger issues now than it did in 2008.

RT: And despite that, even considering these issues in the Eurozone, many politicians in Iceland believe it’s still in the country’s best interest to join the European Union. Why would that be the case?

MB: I think it really goes back to cultural and economic issues within both Iceland and the Eurozone. I mean, at the end of the day if you’re an optimist the Eurozone isn’t a bad bet. I’m personally am not an optimist, I think it is a bad bet, but I think that if you’re operating within the assumption that the Eurozone will get out of its current mess relatively unchanged it’s not a bad political idea. It’s certainly not a bad one that a small country could tie itself to. I don’t think it’s a good idea in the long run, but it does make sense if you’re operating from that assumption, that you say you want to be a part of it.

Iris Aegisdottir gets bags of food on March 3, 2010 in a warehouse in Reykjavik, where up to 550 families queue every week to receive free food from the Icelandic Aid to Families organization. (AFP Photo / Halldor Kolbeins)