Iceland’s new government facing impatient creditors

Iceland’s new coalition of Social Democrats and Left Greens, winners of the recent elections, is facing the immediate prospect of dealing with creditors impatient for repayment. The government will simultaneously have to deal with financiers demanding compliance with the terms of the international bailout.

“They’re saddled with the same problems,” commented Lars Christensen, head of emerging markets at Danske Bank A/S in Copenhagen. “There’s no quick fix. This isn’t a structural problem. They just need to repay their debt.”

Prime Minister Johanna Sigurdardottir’s combination of Social Democrats and Left Greens won 51.5 percent of the popular vote in April. The Independence Party bore the brunt of the blame for the financial collapse of the island.

Speaking on national television as the early results were flooding in, the Prime Minister informed his audience that “New times have arrived.” He claimed the Icelandic population “are settling the score with the past, with the neo-libertarianism, with the Independence Party which has been in power here for too long.”

Editor’s comment: "The economic challenges facing the coalition are immense. Not simply is there a total collapse in international confidence in Iceland’s banking system, but the island is facing both a shrinking economy combined with a massive increase in unemployment. This was lower than one per cent a year ago but rose to 8.9 per cent in March."

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