The international media has been comparing Cyprus’ current financial crisis to that of Iceland’s in 2008 with the Financial Times and The New York Times among the publications to draw similarities between events in the two countries.
Photo: Páll Kjartansson/Iceland Review.
The New York Times featured an opinion piece on Thursday by op-ed columnist Paul Krugman on the Cyprus crisis, entitled ‘Treasure Island Trauma,’ where he points to the similarities between the country and Iceland, another island in Europe.
“Like Cyprus now, Iceland had a huge banking sector, swollen by foreign deposits, that was simply too big to bail out. Iceland’s response was essentially to let its banks go bust, wiping out those foreign investors, while protecting domestic depositors—and the results weren’t too bad,” Krugman writes.
Krugman suggests that Cyprus will follow Iceland’s lead. “My guess is that, in the end, Cyprus will adopt something like the Icelandic solution, but unless it ends up being forced off the euro in the next few days—a real possibility—it may first waste a lot of time and money on half-measures, trying to avoid facing up to reality while running up huge debts to wealthier nations. We’ll see.”