Iceland Economy Essay

Submitted By rdz2013
Words: 2435
Pages: 10

Concslusions on Iceland
(extract from the Communication from the Commission to the European Parliament and the
Council "Enlargement Strategy and Main Challenges 2012-2013", COM(2012)600 final)
Iceland continues to meet the political criteria. Iceland is a well-functioning democracy with strong institutions and deeply rooted traditions of representative democracy. The country’s judicial system is of a high standard, and Iceland ensures the continuous strengthening of its already high level of protection on fundamental rights.
The constitutional council’s proposals on the reform of the Constitution are currently being reviewed by the parliament. Following the conclusions of the Special Investigation
Committee (SIC), a number of measures were taken with a view to increasing the efficiency of the public administration. Presidential elections were held in June 2012, with the incumbent President reelected for a fifth term in office.
The Office of the Special Prosecutor continued working efficiently on cases relating to the
2008 banking crisis. In April 2012, the Court of Impeachment found the former Prime
Minister at the time of the financial crisis guilty of one of four charges against him, namely that he had failed to hold dedicated Cabinet meetings ahead of the crisis. No sentence was passed. Progress can be reported in further strengthening the anti-corruption framework. As regards conflicts of interest, a code of conduct for central government staff was established in spring
2012. Codes of conduct for civil servants in general and for political advisors still need to be established. Iceland continued to safeguard fundamental rights, including economic and social rights. The
UN Convention on the Rights of Persons with Disabilities, the Council of Europe Convention on preventing and combating violence against women and domestic violence and the Council of Europe Framework Convention for the Protection of National Minorities still need to be ratified. Following a long and severe recession, the Icelandic economy started to recover in 2011 and grew by 2.6% in 2011, and expanded at a similar rate in the first half of 2012. The authorities proceeded with domestic debt restructuring, financial sector stabilisation and fiscal consolidation. A second post-crisis international bond of US$ 1 billion was sold to foreign investors in May 2012 at a rate of 6%. Iceland regained investment grade by all three major rating agencies. Yet, weak financial and non-financial sectors’ balance sheets still imply considerable risks to economic and financial stability. The removal of capital restrictions remains a key policy challenge.
As regards the economic criteria, Iceland can be considered a functioning market economy.
However, financial sector weaknesses and capital movement restrictions still impede an efficient allocation of resources. Iceland should be able to cope with competitive pressures and market forces within the Union over the medium term, provided that it continues to address current structural weaknesses through appropriate macroeconomic policies and structural reforms.
The policy mix with a strong focus on exchange rate stabilisation, fiscal consolidation, and domestic debt restructuring has been supportive in re-establishing a higher degree of macroeconomic stability. Monetary policy has been tightened in reaction to rising inflation



and exchange rate stability has been broadly preserved. Fiscal consolidation continued with additional revenue and spending measures in the 2011 and 2012 budgets. Measures were taken to reduce general government refinancing risks and to strengthen local government finances. A trade surplus and a roughly balanced underlying current account were maintained.
A fall in the unemployment rate and recent growth of employment suggest that labour market conditions have improved somewhat. The country enjoys good basic infrastructure, abundant