Iceland is a risky model

The country should not be held up as a model for other peripheral sovereigns to follow.

In late February Iceland agreed to a referendum on the latest deal for the government to assume responsibility for repayments of sums the UK and Dutch governments paid out to compensate depositors in Icesave, the internet arm of collapsed Landsbanki. Any news from Iceland is a reminder that at least one country has already made the stark choice of saving domestic depositors in its collapsing banks while letting the banks’ international bondholders go hang.

The widespread assumption seems to be that Iceland has got away with this and that it deserves to.

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