CNN has this post up about Iceland's geothermal economy. (and yesterday I had this Iceland post up). Iceland is in the middle of 'near melting' economy - with housing related investments the kind of investments, which brought big bank like Citibank to its knees.. but in a much smaller scale; uhm, nationalized 3 of its largest banks! - this kind of conditions challenges the sustainability for much of its green economy like never before.
To understand how they got into this problem in the first place, watch this v-clip. (It tells how they got into this highly leverage game).
The severity of their financial crisis...via AFP.
The IMF recently forecast that the country's gross domestic product (GDP) was expected to contract by 10 percent next year.
The government has meanwhile forecast that the public debt would increase from 29 percent of GDP at the end of 2007 to just over 100 percent of GDP at the end of 2009.
The cost of the banking crisis could be as high as 85 percent of GDP, or 1.1 trillion kronur (7.2 billion euros, 9.4 billion dollars). - emphasis added
Although, the country have secured lifeline from the international community including the IMF, looking at the cost to service debt alone at over 100% of GDP by 2009? That sounds like a pretty high debt to income ratio..
So now, what the government has to do - first thing first - is to restore confidence. A tall order for small country like Iceland..
At the Climate Institute's Washington, D.C., conference, Iceland President Ólafur Ragnar Grímsson described how his country moved from a coal-based economy to one that uses renewable energy for all electricity and nearly all heating. Only transportation still depends on fossil fuels. In total, 70% of Iceland's energy comes from hydroelectric and geothermal sources, Grímsson said. (Chemical & Engineering News)
And if they pass "this" big test, we'll soon learn that Iceland will be a case study for the world's first green economy that survives a major financial blow...