What is somewhat less well known is that at that point, Iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005–2007 and a currency crisis in the first half of 2008. The banking collapse and the associated wealth loss and further currency depreciation made the recession significantly worse, of course, as did the global recession that began in the fourth quarter of 2008. In autumn 2008, two separate but interrelated sub-stories of the recent Icelandic saga converged in a tragic grand finale. The first story was related to Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland. It might have been somewhat more extreme this time around, but it wasn’t fundamentally different. All the usual suspects were present, including strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. Quite the contrary: there was a policy conflict between monetary policy and the demand levers pulled by the Government, and the risks inherent in capital flows, FX balance sheets, and credit and asset price booms were left under-regulated and insufficiently supervised.
The European League for Economic Cooperation has been, ever since its foundation in 1946, an independent network of business people who put their knowledge and influence together to deepen European integration. The League has stood out over the decades for a lot of significant reasons, including the very diverse nature of its membership and their interests, as well as a specific concern for independence in formulating their opinions. It is exactly this diversity and independence that prompts ELEC to ask the right questions and, in the answers it provides, to give priority to the common European interest. I salute the close cooperation between government officials in the region with high European officials, as well as, with the private sector and prestigious organizations such as ELEC. The Prime Minister of Romania, Mr. Dacian Ciolos, will have a brief address on this topic. Mr. Achim Irimescu, Minister for Agriculture and Rural Development will chair the round table on agriculture, together with his counterpart from the Republic of Moldova, Minister Eduard Grama and other renowned authorities who are ready to share their expertise on the factors that generate food insecurity in the extended Black Sea region in the context of the 21st century challenges. Mr. Vasile Iuga, Partner at PricewaterhouseCoopers will chair the round table on energy security and together with prominent experts will focus on long term development of energy networks in Central and Eastern Europe. Ladies and Gentlemen, Now, a few words about the topic of this conference.