The world warming to Iceland again?

Iceland’s economic prospects are looking favourable again, according to The Wall Street Journal. Icelandic banks had been faced with crippling debt insurance bills, as some analysts feared for their survival.

But the country’s economy was less at risk of collapse than many international bankers had feared. Icelandic banks and the country’s government have been increasingly vocal in defending their image since the beginning of 2008, declaring that certain parties might have been plotting to profit from the downfall of the Icelandic economy.

The cost of borrowing has significantly decreased again, both for the private banks and the central bank. As the cost of insuring debt decreases, so the banks are able to work in a freer environment, and so, the banks hope, the cost and the risk will continue to decrease.

The banks welcome this step back in the direction of normality, but argue that their CDS levels should never have been pushed so high. They argue that international markets were reacting to speculation and not to the actual state of the Icelandic economy.

This news comes on the back of other similar positive opinions voiced by Bear Stearns bank and Icelandic Minister of Finance, Arni Matthiesen.

icenews.is