Iceland’s state treasury received ISK 37 billion (USD 330 million, EUR 240 million) in tax revenue in 2007 from the country’s three largest commercial banks, Glitnir, Landsbanki and Kaupthing, which have now been nationalized. This year they will not deliver more than ISK 12 billion (USD 110 million, EUR 80 million).
“It will be difficult to bridge this gap,” University of Iceland economics professor Thórólfur Matthíasson told Fréttabladid. “It is comparable to 50 percent of all fishing and fish processing being erased.”
Matthíasson estimates that the collapse of the banks will result in a ten percent recession of gross domestic product (GDP), “which will of course also reduce the revenue of tax on turnover. The influence will be widespread.”
“We can now see the effects of building the banks on sand, and that sand is called the Icelandic króna,” Matthíasson said, adding that the Central Bank should have acquired a foreign currency reserve large enough to support the króna.
“The other way would have been to adopt the euro. Neither was done and this is the cost,” Matthíasson concluded.