A Tale of 2 Economies: Switzerland and Iceland
INTRODUCTION
In the past year, one has not been able to open a financial newspaper without consistently seeing stories about the unfolding European debt crisis, which has become the headline story in the global economy. The reason for this is that as the state of affairs develops, there are implications for nearly every country in this new era of globalization. And the effects are felt no more than in the countries just outside of the fiscal euro-zone, which are the most heavily exposed to the financially endangered bloc of nations. Two of these nations are Switzerland and Iceland. Both economies navigate a new economic landscape filled with significant risks, and it will be crucial for these nations to take the correct steps to ensure economic growth in the near future. They provide an interesting point for comparison because of their similar status as “first world” nations, geographical locations near the fiscal euro-zone, banking struggles during the financial crisis, and significant currency swings in recent years, yet they have very different competitive economic advantages that require some similar and some different actions taken. The Swiss-franc and the krona, must be stabilized to healthy levels that will put both economies on a sounder footing. The policies of the two countries should diverge in the banking sector, which has always been a lucrative area for Switzerland, and not Iceland. Switzerland, which remains heavily dependent on this sector for profits, must continue to refocus its financial services industry to safer areas of the business where it thrives. Iceland should be less ambitious in this realm, ensuring that it continues to take steps that this sector remains merely stable and healthy. However, Iceland has its own unique opportunities for growth. The country has the ability to leverage its natural geothermal capabilities to form trade partnerships and to draw in Foreign Direct Investment, a huge opportunity given the worldwide uptick in
In the past year, one has not been able to open a financial newspaper without consistently seeing stories about the unfolding European debt crisis, which has become the headline story in the global economy. The reason for this is that as the state of affairs develops, there are implications for nearly every country in this new era of globalization. And the effects are felt no more than in the countries just outside of the fiscal euro-zone, which are the most heavily exposed to the financially endangered bloc of nations. Two of these nations are Switzerland and Iceland. Both economies navigate a new economic landscape filled with significant risks, and it will be crucial for these nations to take the correct steps to ensure economic growth in the near future. They provide an interesting point for comparison because of their similar status as “first world” nations, geographical locations near the fiscal euro-zone, banking struggles during the financial crisis, and significant currency swings in recent years, yet they have very different competitive economic advantages that require some similar and some different actions taken. The Swiss-franc and the krona, must be stabilized to healthy levels that will put both economies on a sounder footing. The policies of the two countries should diverge in the banking sector, which has always been a lucrative area for Switzerland, and not Iceland. Switzerland, which remains heavily dependent on this sector for profits, must continue to refocus its financial services industry to safer areas of the business where it thrives. Iceland should be less ambitious in this realm, ensuring that it continues to take steps that this sector remains merely stable and healthy. However, Iceland has its own unique opportunities for growth. The country has the ability to leverage its natural geothermal capabilities to form trade partnerships and to draw in Foreign Direct Investment, a huge opportunity given the worldwide uptick in