Brexit breakthrough: How Iceland’s Project Fear failed and country THRIVED outside EU

Former Governor of the Bank of England Mark Carney has recently returned to his native Canada after seven long years in Britain. Previously Governor of the Bank of Canada, Mr Carney relocated from Rockcliffe Park in Ottawa to London in 2013 when he was appointed to the UK’s central bank by then-Chancellor George Osborne. Known as the George Clooney of finance, Mr Carney was understood to be one of the highest-paid central bankers in the world with a package amounting to £883,911. Brexit changed the complexion of his job significantly, with the 54-year-old issuing frequent warnings about the perceived risk to the UK economy before and after the vote.

He was often accused of contributing to “Project Fear”, particularly after he warned that a vote to leave the EU could have pushed the economy into recession.

Not only did a recession never materialise, the Bank of England’s prediction that the economy would stagnate in the second half of 2016 was incorrect, as it grew 0.6 percent in the third quarter.

The British pro-EU campaign was not the only one guilty of scaremongering, though.

According to a 2016 report by The Telegraph, as pro-Brexit campaigners decried the “Project Fear” tactics deployed in the UK’s referendum debate, Iceland witnessed something more akin to “Project Apocalypse” in the aftermath of the 2008 financial crash.

The report reads: “Where Britons are warned of the potentially cataclysmic implications of a UK exit from the European Union, Icelanders were sold a tale of perma-doom that would plague the island until it became a member of the bloc.

“It was in the wake of this turmoil that Iceland formally launched its bid to become a full member state of the European Union in July 2009.

“Lumbered with a currency that lost 60 percent of its value, draconian capital controls and mass austerity, the rationale for membership was simple: as part of the EU’s supranational institutions and monetary union, Iceland would finally have shelter from the market speculators that bought the country to its knees. “

Sigmundur Gunnlaugsson, Iceland’s former Prime Minister, told the publication the membership debate was dominated by fears over Iceland’s very survival.

He said: “Without membership we were doomed.

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“There was never any discussion about the ideals and nature of the European Union or whether that was something Icelanders wanted to be part of.

“The application was simply presented as an economic necessity with claims that as soon as we applied, we would improve our credibility internationally and the euro would be the solution to all our problems.”

However, Iceland’s Project Fear, just like in the UK, failed.

The report explained: “Free to operate an independent monetary policy and allow its currency to slide, Iceland was soon brought back from the precipice. Its export sector – dominated by fisheries and energy – quickly began to thrive.

“With the currency acting a natural shock absorber for the economy, wages remained steady and unemployment bottomed out at around nine percent.”

Mr Gunnlaugsson added: “Not being a member of the euro proved indispensable in our quick recovery.

“There is hardly any doubt that if we would have been members of the EU and the euro at the time, the country would have been bankrupted and put in an economic position more resembling that of Greece than what we see in Iceland today.”

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The fantastic reversal of fortunes eliminated any lingering case for EU membership.

Mr Gunnlaugsson’s centre-right coalition government formally withdrew from the accession process in 2015 and public appetite for restarting talks dwindled.

Polls carried out in the wake of the move – which was not put before a referendum – showed an overwhelming 70 percent of Icelanders were happy to remain out of the EU.

Iceland is in the single market accepting the free movement of goods, services, capital and people to and from EU countries but it is not a member of the eurozone.

It is also not signed up to the Common Agricultural Policy, the Common Fisheries Policy or the customs union, meaning that it can strike its own trade deals with countries outside the bloc.

In 2013, Reykjavik became the first European nation to conclude a trade agreement with China.