In terms of growth Iceland has fared better than anyone would have dared hope. The IMF projected a contraction of 10 percent in 2009 that turned out to be 6.5 percent. Apparently—note to John Cochrane—fiscal multipliers do exist after all. In 2010, the economy contracted by 3.5 percent, and in 2011 growth returned at 3 percent, based in part upon real exports of goods and services. Growth at a similar rate has continued into 2012, placing Iceland near the top of OECD growth performance. With higher marginal rates of taxation, returning growth, capital control, and equal fiscal tightening, Iceland is on target to eliminate its budget deficit in 2014 and have a budget surplus of 5 percent in 2016.

Mark Blyth, Austerity, loc. 645