Lettera al direttore del Financial Times

Sir, Robert Wade (l'autore di un articolo sull'Islanda apparso sul Financial Times capace di far sembrare sensato quello sul Corriere di un paio di mesi fa - ndM)  gets Iceland very wrong.

Macroeconomics first: annual gross domestic product growth was 5.2 per cent in 2003-07, and registered unemployment is still only 1 per cent. The current slowdown is welcome. There were indeed macroeconomic imbalances, including an overvalued exchange rate. Although the recent depreciation has overshot, it is a normal element of correcting the current account deficit, which will probably fall below 10 per cent of GDP this year. GDP growth 2008Q1 over 2007Q1 was 1.1 per cent, a slowdown but hardly a catastrophe. And Icelanders, now the fourth richest people in the Organisation for Economic Co-operation and Development (PPP-corrected GDP per capita), will survive.

The economy has invested heavily in aluminium, tapping abundant geothermal energy. This is now paying off. Exports surged 22 per cent in 2007, and returns on the investments should be excellent, with aluminium and energy prices at historic highs.

External debt figures that omit returns on portfolio investments and count direct investments at book value greatly exaggerate Iceland’s negative net international investment position. On IMF definitions, that was 120 per cent of GDP at end-2007. The Central Bank of Iceland, no fan of spendthrift ways, reckons that a reasonable estimate of the market value of direct investments brings it down to a negative 27 per cent of GDP, which is not exceptional. That fits, too, with the balance sheets of households and government. Gross debt of Icelandic households at end-2007 was high at over 200 per cent of disposable income, but their assets, including the fully funded pension funds, were over 750 per cent of disposable income. Net government debt at end-2006 was 8 per cent of GDP and fell close to zero in 2007! Are these people who have “taken to borrowing as though there is no tomorrow” ? That sounds more like the Americans or indeed the British than the Icelanders.

Finally, the banks. In the European Economic Area, Iceland could not get away with “as light a regulatory touch as possible”. It has had to apply exactly the same legislation and regulatory framework as European Union member states, and its Financial Services Authority is highly professional. Prof Wade repeats the common claim that Icelandic banks “operated like hedge funds”. Much of the growth came from mergers and acquisitions, so the operations of Icelandic banks are now geographically and sectorally diversified. Most of their lending is abroad. For a while, their expansion was funded mainly by borrowing in international wholesale markets. But the "mini-crisis" of early 2006 forced a change. By end-2007, their funding structure was similar to their peers in other Nordic countries, in many cases with better deposit-loan ratios and maturity structures. They have had higher returns on equity and higher capital ratios than their Nordic peers. And the Icelandic banks had virtually no exposure to the toxic securities that almost all other banks did buy.

These facts do not square with aspersions about people with “scant experience in modern banking”. Should Iceland have called on Chuck Prince, Stan O’Neal or Marcel Ospel? (sono i tizi che hanno affossato le varie Citigroup, Bear Stearns e compagnia bella - ndM)

The rest of Prof Wade’s comments are political, including rumour-mongering. This and his carelessness with the data are regrettable in the fragile conditions of today's international financial markets. He would prefer that the Icelanders adopt “a more Scandinavian model”. The advice is doubtless well-intentioned, but we should not be surprised if they ignore it.

Fridrik Már Baldursson,
Professor of Economics,
Reykjavik University, Iceland
Richard Portes,
Professor of Economics,
London Business School, UK

Pubblicato il 4/7/2008 alle 14.49 nella rubrica Finanza.

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