The Icelandic government continues to pay down the debts created by the collapse of the banking system in 2008. After the latest round of buy-back of government bonds debt has dropped to just 24.1% of GDP. This compares to a debt level of close to 100% of GDP following the banking crash.
During the past 12 months the state has reduced government debt by 9.3%, or 88 billion ISK. In August 2017 government debt stood at 946,039 million ISK or 30.2% of GDP, but is 857,533 million ISK today. According to a statement from the Ministry of Finance this has been paid for by selling the stake the Icelandic state acquired in Arion Bank in 2008. Arion was one of the three banks created from the ruins of the bankrupt banks. Paying down debt is one of the goals of the current Left-Green led Grand Coalition.
Read more: Left-Green led Grand Coalition unveils first budget: Debt to drop below 25% of GDP
Rather than bail out the failed banks in the fall of 2008 Iceland allowed them to go into bankruptcy. However, since the entire financial system had collapsed the government had to resuscitate a domestic banking system. This was done by moving the domestic assets and liabilities of the failed banks into new institutions which were financed partially or wholly by the state. In the process the state acquired large stakes in the resurrected banks. The state has now sold its stake in Arion, but retains its stakes in Landsbankinn and Íslandsbanki.
The Icelandic government continues to pay down the debts created by the collapse of the banking system in 2008. After the latest round of buy-back of government bonds debt has dropped to just 24.1% of GDP. This compares to a debt level of close to 100% of GDP following the banking crash.
During the past 12 months the state has reduced government debt by 9.3%, or 88 billion ISK. In August 2017 government debt stood at 946,039 million ISK or 30.2% of GDP, but is 857,533 million ISK today. According to a statement from the Ministry of Finance this has been paid for by selling the stake the Icelandic state acquired in Arion Bank in 2008. Arion was one of the three banks created from the ruins of the bankrupt banks. Paying down debt is one of the goals of the current Left-Green led Grand Coalition.
Read more: Left-Green led Grand Coalition unveils first budget: Debt to drop below 25% of GDP
Rather than bail out the failed banks in the fall of 2008 Iceland allowed them to go into bankruptcy. However, since the entire financial system had collapsed the government had to resuscitate a domestic banking system. This was done by moving the domestic assets and liabilities of the failed banks into new institutions which were financed partially or wholly by the state. In the process the state acquired large stakes in the resurrected banks. The state has now sold its stake in Arion, but retains its stakes in Landsbankinn and Íslandsbanki.
