More generally, what will be the IMF’s role in restructuring Iceland’s financial sector?
Flanagan: The IMF is not involved in the wind-up of the old banks. That is the task of the resolution committees and the bankruptcy process. But we are providing a lot of advice on how to recapitalize, regulate, and supervise the financial system. More generally, we are providing macroeconomic advice to the government, and our financing is helping the government manage the macroeconomic burden of the restructuring in a way that minimizes dislocations. IMF Survey online: How much do you think migration will hurt economic recovery? Flanagan: Out–migration may be an issue in the short term. If it does, there could be some impact on future growth. But the consequences are not all negative. For instance, migration may be accompanied by remittances, which would help lessen the pressures on Iceland’s economy. It may even help contain the rise in unemployment, and the fiscal cost of the crisis. In the longer term, I am convinced Iceland will remain a very attractive and rich society, with a vi
