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Iceland president: Letting banks fail helped recovery

From the CNN Wire Staff
updated 12:53 PM EST, Wed December 19, 2012
STORY HIGHLIGHTS
  • Iceland is pinning its hopes on the Arctic region as the eurozone remains in financial crisis
  • The president says he would veto a parliamentary decision to seek EU membership
  • Iceland allowed its banks to fail during its crisis, and the economy has since recovered

(CNN) -- Iceland is pinning its hopes on the Arctic as Europe continues to suffer from high unemployment and faltering growth.

Iceland's president Olafur Ragnar Grimsson told CNN's Richard Quest: "The Arctic region is gradually becoming one of the most important playing grounds in the 21st century world economy."

His comments come four years after the country let its debt-ridden banks fail, and as the country's growth looks set to far outpace the eurozone. Grimsson said the decision not to save the banks was "the most difficult I ever had to make," but maintained it was the right one.

"Allowing the banks to fail is one of the fundamental reasons Iceland is now in a strong recovery with respect to other European countries," he said.

Fishing lifts Iceland's economy

Now, according to Grimsson, "Iceland is better placed to benefit by maintaining our present position, rather than to let the EU speak on our behalf."

Iceland president's toughest decision

Iceland fishing for deal on EU quotas

The 69-year-old president pointed to Norway and Greenland -- two other Arctic economies and non-European Union members -- as role models.

He said he would not hesitate to veto a parliamentary decision to seek EU membership, a promise he told CNN he had based five successful presidential runs on.

However, Grimsson said he was not sure whether Iceland's strategy with its banks could have been replicated by other countries with similar problems, such as Ireland.

"Being part of the eurozone, they couldn't devalue their currency. But they could have adopted our policy with respect to the banks," he said.

The Icelandic krona fell sharply as a result of the financial collapse, helping the country recover by increasing demand for exports.

"There are still scars," Grimsson said, "but on the whole, the will of the Icelandic people has enabled us to recover and move confidently towards the future."

CNN's Arvid Ahlund contributed to this report.

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