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| Iceland rises further into investment grade status | |
| (about 20 hours later) | |
| Iceland's rehabilitation after several years as a pariah in the global financial markets gathered pace last night after ratings agency Fitch said the island nation's debts had moved further into investment grade status. | |
| Fitch said Iceland's debts had been upgraded to BBB – from the lowest rung of the investment grade category, BBB- – after a strong recovery from the financial crisis. | |
| Reykjavik's meteoric recovery comes after its 300,000 residents were told they would be locked out of the world's financial markets for decades after they refused to rescue a group of bankrupt banks in 2008. | Reykjavik's meteoric recovery comes after its 300,000 residents were told they would be locked out of the world's financial markets for decades after they refused to rescue a group of bankrupt banks in 2008. |
| Unlike Ireland, Portugal and Spain, the Icelandic government let the country's banks become insolvent rather than spend tens of billions of pounds on bailout funds. | Unlike Ireland, Portugal and Spain, the Icelandic government let the country's banks become insolvent rather than spend tens of billions of pounds on bailout funds. |
| Ireland, which spent more than €40bn rescuing its banks, recently re-negotiated a series of loans with the EU that will mean its debt payments stretch beyond 2050. | Ireland, which spent more than €40bn rescuing its banks, recently re-negotiated a series of loans with the EU that will mean its debt payments stretch beyond 2050. |
| Spain could still be forced to accept an EU bailout after a further deterioration in the financial stability of its major banks, which have only recently revealed the full extent of they bad loans they made in the run up to the banking crisis. | Spain could still be forced to accept an EU bailout after a further deterioration in the financial stability of its major banks, which have only recently revealed the full extent of they bad loans they made in the run up to the banking crisis. |
| Paul Rawkins, senior director in Fitch's Sovereign Rating Group, said: "The restoration of Iceland's long-term foreign currency rating to investment grade reflects the progress that has been made in restoring macroeconomic stability, pushing ahead with structural reform and rebuilding sovereign creditworthiness since the 2008 banking and currency crisis. | Paul Rawkins, senior director in Fitch's Sovereign Rating Group, said: "The restoration of Iceland's long-term foreign currency rating to investment grade reflects the progress that has been made in restoring macroeconomic stability, pushing ahead with structural reform and rebuilding sovereign creditworthiness since the 2008 banking and currency crisis. |
| "Iceland has successfully exited its IMF programme and gained renewed access to international capital markets. A promising economic recovery is under way, financial sector restructuring is well-advanced, while public debt/GDP appears to be close to peaking on the back of a robust fiscal consolidation programme." | "Iceland has successfully exited its IMF programme and gained renewed access to international capital markets. A promising economic recovery is under way, financial sector restructuring is well-advanced, while public debt/GDP appears to be close to peaking on the back of a robust fiscal consolidation programme." |
| At the time of the banking debacle, Iceland was lauded by economists, including Princeton Nobel prize winner Paul Krugman, who advocated that other countries follow suit and refuse to indemnify bank creditors from insolvent banks. | At the time of the banking debacle, Iceland was lauded by economists, including Princeton Nobel prize winner Paul Krugman, who advocated that other countries follow suit and refuse to indemnify bank creditors from insolvent banks. |
| Krugman said markets would be more forgiving when the situation was stabilised. | Krugman said markets would be more forgiving when the situation was stabilised. |
| Iceland's population accepted steep cuts in pay and government services as the price of the bailout, but unlike their European counterparts, have escaped with only relatively small debts. | Iceland's population accepted steep cuts in pay and government services as the price of the bailout, but unlike their European counterparts, have escaped with only relatively small debts. |
| Since it paid back the IMF loans in August 2011 it has increased exports and stabilised the government's finances. Growth in 2011 reached 3%. | Since it paid back the IMF loans in August 2011 it has increased exports and stabilised the government's finances. Growth in 2011 reached 3%. |
| Fitch said that flexible labour and product markets and a floating exchange rate have facilitated the correction of external imbalances and contained the rise in unemployment, while the financial system has shrunk to one fifth of its former size, making the banking system safer. | Fitch said that flexible labour and product markets and a floating exchange rate have facilitated the correction of external imbalances and contained the rise in unemployment, while the financial system has shrunk to one fifth of its former size, making the banking system safer. |
| • This article was amended on 15 February 2013 because the original text and headline suggested that Fitch had upgraded Iceland's debt from junk status to investment grade status. |