Iceland - tax reform has not prevented an economic crisis

The American Right likes to claim that Iceland has seen an economic miracle, partly as a result of tax reform.

The FT reported this yesterday:

Iceland has the highest interest rates in Europe after the central bank raised rates by 50 basis points to a record 15.5 per cent yesterday as it strove to restore confidence in its struggling currency and quench fears of a banking crisis.

Some miracle.

And some indication that abandoning fiscal policy really is a very bad idea indeed.