The Icelandic treasury has not only recuperated all of its direct outlays associated with the collapse of the Icelandic banks in 2008, but is actually looking at a sizeable surplus now when the books are being closed on one of the largest financial collapses in world history. According to a report prepared by economists Ásgeir Jónsson and Hersir Sigurgeirsson for the ministry of finance, special taxes and the stability payments of the estates will net the treasury 76-160 billion ISK (0.61-1.28 billion USD/0.55 -1.15 billion EUR)
Read more: Bankers Behind Bars: A guided walking tour through the collapse of Iceland's banking system in 2008
The collapse of the Icelandic banks collapsed in October 2008 was one of the largest crashes in history. In 2012 the IMF estimated that the direct cost of the banking crash during the years 2008-2011, which included the losses incurred by the central bank and government guarantees, amounted to 43% of GDP. Since then, however, the state has recuperated all of these costs in the form of taxes levied on the estates of the collapsed banks. Ásgeir Jónsson and Hersir Sigurgeirsson estimated that the “profit” is 2.6% of GDP.
The economists stress that this figure includes only the direct costs involved in the collapse: The indirect costs to the government and the costs to the Icelandic economy were far greater than the direct outlays by the treasury. “We do not factor in various indirect costs, such as lost tax revenue and increased government spending due to the economic recession caused by the banking crash.” Estimating these indirect costs is extremely difficult, as it requires guesswork about what would have happened had the banks not collapsed.
Read more: The agreement with estates of collapsed banks will reduce net debt position to below 10% of GDP
Ásgeir Jónsson told the local newspaper Morgunblaðið that the favourable result could be explained by three factors: Decisive legislative action when the banks collapsed, the fact that the cost of the collapse fell primarily upon foreign bondholders and finally the capital controls instituted in the fall of 2008. The capital controls allowed the government to control payments from the estates, forcing them to take domestic financial stability into account and pay a stability tax which helped balance the books on the banking crash.
The Icelandic treasury has not only recuperated all of its direct outlays associated with the collapse of the Icelandic banks in 2008, but is actually looking at a sizeable surplus now when the books are being closed on one of the largest financial collapses in world history. According to a report prepared by economists Ásgeir Jónsson and Hersir Sigurgeirsson for the ministry of finance, special taxes and the stability payments of the estates will net the treasury 76-160 billion ISK (0.61-1.28 billion USD/0.55 -1.15 billion EUR)
Read more: Bankers Behind Bars: A guided walking tour through the collapse of Iceland's banking system in 2008
The collapse of the Icelandic banks collapsed in October 2008 was one of the largest crashes in history. In 2012 the IMF estimated that the direct cost of the banking crash during the years 2008-2011, which included the losses incurred by the central bank and government guarantees, amounted to 43% of GDP. Since then, however, the state has recuperated all of these costs in the form of taxes levied on the estates of the collapsed banks. Ásgeir Jónsson and Hersir Sigurgeirsson estimated that the “profit” is 2.6% of GDP.
The economists stress that this figure includes only the direct costs involved in the collapse: The indirect costs to the government and the costs to the Icelandic economy were far greater than the direct outlays by the treasury. “We do not factor in various indirect costs, such as lost tax revenue and increased government spending due to the economic recession caused by the banking crash.” Estimating these indirect costs is extremely difficult, as it requires guesswork about what would have happened had the banks not collapsed.
Read more: The agreement with estates of collapsed banks will reduce net debt position to below 10% of GDP
Ásgeir Jónsson told the local newspaper Morgunblaðið that the favourable result could be explained by three factors: Decisive legislative action when the banks collapsed, the fact that the cost of the collapse fell primarily upon foreign bondholders and finally the capital controls instituted in the fall of 2008. The capital controls allowed the government to control payments from the estates, forcing them to take domestic financial stability into account and pay a stability tax which helped balance the books on the banking crash.
