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OECD Economic Surveys: Iceland 2011 OECD Economic Surveys SurveysEconomic OECD ICELAND SPECIAL FEATURE: FISHERIES OECD Economic Surveys Most recent editions Australia, November 2010 Italy, April 2011 Austria, July 2009 Japan, April 2011 Belgium, June 2011 Korea, June 2010 ICELAND Brazil, July 2009 Luxembourg, May 2010 Canada, September 2010 Mexico, May 2011 Chile, January 2010 Netherlands, June 2010 China, February 2010 New Zealand, April 2011 Czech Republic, April 2010 Norway, March 2010 Denmark, November 2009 Poland, April 2010 2011/11 Volume Estonia, April 2011 Portugal, September 2010 JUNE 2011 Euro area, December 2010 Romania, October 2002 European Union, September 2009 Russian Federation, July 2009 Federal Republic of Yugoslavia, January 2003 Slovak Republic, November 2010 Finland, April 2010 Slovenia, February 2011 France, March 2011 South Africa, July 2010 Germany, March 2010 Spain, December 2010 Greece, July 2009 Sweden, January 2011 Hungary, February 2010 Switzerland, December 2009 Iceland, June 2011 Turkey, September 2010 India, June 2011 Ukraine, September 2007 Indonesia, November 2010 United Kingdom, March 2011 Ireland, November 2009 United States, September 2010 Israel, January 2010 ICELAND Please cite this publication as: OECD (2011), OECD Economic Surveys: Iceland 2011, OECD Publishing. http://dx.doi.org/10.1787/eco_surveys-isl-2011-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information. Volume 2011/11 ISSN 0376-6438 June 2011 2011 SUBSCRIPTION (18 ISSUES) ISSN 1995-3240 2011 June SUBSCRIPTION BY COUNTRY ISBN 978-92-64-09320-1 -:HSTCQE=U^XWUV: 10 2011 10 1 P 102011101_Iceland.indd 1 10-Jun-2011 4:57:10 PM OECD Economic Surveys: Iceland 2011 Please cite this publication as: OECD (2011), OECD Economic Surveys: Iceland 2011, OECD Publishing. http://dx.doi.org/10.1787/eco_surveys-isl-2011-en ISBN 978-92-64-09320-1 (print) ISBN 978-92-64-09321-8 (PDF) Series: OECD Economic Surveys ISSN 0376-6438 (print) ISSN 1609-7513 (online) OECD Economic Surveys: Iceland ISSN 1995-3240 (print) ISSN 1999-0308 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Photo credits: Cover © marchello/Shutterstock.com Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2011 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. TABLE OF CONTENTS Table of contents Executive summary. 10 Assessment and recommendations. 13 Bibliography. 41 Annex A1. Progress in structural reform . 43 Chapter 1. Restoring the financial sector to health. 45 Iceland’s main banks pursued risky strategies that led to their downfall. 46 Financial sector restructuring has been achieved in a way that minimises fiscal costs and strengthens market discipline . 47 Steps are being taken to accelerate private-sector debt restructuring. 54 Micro-prudential regulation and supervision is being improved . 58 Macro-prudential regulation is to be strengthened. 60 The blanket deposit guarantee will eventually be replaced by limited deposit guarantee arrangements . 63 Concluding comments. 64 Notes. 65 Bibliography. 65 Chapter 2. Securing sustainable public finances. 67 Public finances deteriorated markedly in the wake of the financial crisis . 68 The government is implementing a demanding fiscal consolidation programme under the aegis of the IMF SBA. 70 Consolidation efforts will need to be maintained for many years to keep fiscal policy on a sustainable path . 73 The government has implemented institutional reforms to strengthen fiscal discipline . 76 The adoption of fiscal rules would help to sustain needed fiscal restraint. 76 Note . 78 Bibliography. 78 Chapter 3. Returning to work in Iceland . 79 The Icelandic labour market continues to slump in the wake of the financial crisis . 80 High unemployment will likely decline slowly . 83 Policy actions can speed up the reduction in unemployment and lessen increases in structural unemployment. 89 Concluding remarks . 96 Notes. 96 Bibliography. 96 OECD ECONOMIC SURVEYS: ICELAND © OECD 2011 3 TABLE OF CONTENTS Chapter 4. Ensuring a sustainable and efficient fishery . 99 Scientifically-based TACs and the ITQ system are the foundations of Iceland’s successful fisheries management system . 101 Resource rents could be increased by restricting fishing effort to below the level compatible with biological sustainability . 104 The special resource rent tax should be increased but not by so much as to undermine the ITQ system . 108 The fisheries management system should not be undermined in the pursuit of social objectives . 109 Iceland is negotiating to maintain the key features of its fisheries management system in its EU accession negotiations . 110 Reducing the Icelandic fishing industry’s Greenhouse Gas (GHG) emissions . 112 Notes. 113 Bibliography. 114 Boxes 1. Implications of the vote against the Icesave agreement . 16 2. Iceland’s temporary derogation under the OECD Codes on the Liberalisation of Capital Movements and of Current Invisible Operations . 18 3. Summary of recommendations for restoring the financial sector to health . 24 4. Summary of recommendations for delivering sound inflation performance and monetary policy . 27 5. Summary of recommendations for securing sustainable public finances . 32 6. Summary of recommendations for fostering the return to work. 34 7. Summary of recommendations for structural reforms to promote long-run growth . 37 8. Summary of recommendations for the fisheries sector . 41 1.1. The Housing Finance Fund. 49 1.2. The Icesave dispute . 53 1.3. Many households are in financial stress . 57 1.4. Follow-up of financial sector recommendations in the 2009 OECD Economic Survey of Iceland . 59 1.5. Co-operation arrangements between the CBI and the FME . 61 1.6. Macro-prudential regulation prior to the crisis. 63 2.1. Fiscal space . 73 2.2. Fiscal responsibility legislation . 77 3.1. Gender and unemployment in Iceland during the recession . 81 3.2. Icelandic Labour Unions . 87 3.3. Institutional barriers to employment . 89 3.4. Job training in the short and long run . 92 3.5. Additional methods of increasing employment . 95 4.1. The role of the fishing industry in the Iceland economy. 100 4.2. The mackerel dispute . 103 4.3. Incorporating economics when determining TACs . 104 4.4. The current fisheries resource tax . 107 4.5. Other countries’ experience in auctioning fishing rights . 107 4.6. The taxation of resource rents. 108 4 OECD ECONOMIC SURVEYS: ICELAND © OECD 2011 TABLE OF CONTENTS Tables 1. Demand, output and prices . 17 2. Progress in reducing the proportion of non-performing loans (NPL) has been slow . 21 3. General.
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