The credit default swap (CDS) for the Icelandic sovereign has now dropped to 200 points and has not been lower since months before the banking collapse in October 2008. The CDS has been in constant decline since January and indicates growing belief in Iceland’s economy.
Meanwhile, the CDS spread for Ireland is 683 basis points.
So it seems as if defaulting on debts run up by greedy bankers (German and French with the assistance of their Irish acolytes) and letting your currency depreciate works better — even from the point of view of investors — than socializing private-sector losses and sticking with a fixed exchange rate – the Euro?
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