TROMSOE, NORWAY — Europe’s struggling economies should look to tiny Iceland as a model for managing their crises and returning quickly to growth, especially in winning public support for moderate austerity policies, Prime Minister Johanna Sigurdardottir said.

The North Atlantic island has had one major advantage as it recovers from a crash in 2008 which countries locked in the euro zone do not have – a currency of its own.

Nevertheless, Sigurdardottir told Reuters that Iceland’s mix of measured austerity and unorthodox policies – such as private debt forgiveness and defending welfare payments as much as possible – could offer some lessons to euro zone members.

‘We believe and so does the IMF that our case can be a role model for some of the countries in crisis now,’ she said in a rare interview. ‘I’ve met with several leaders over the past years, some from Greece, and many prime ministers have been surprised by our economic turnaround and asked how we did it.’

In 2008 Iceland’s banking sector collapsed, a shock which euro member Ireland also suffered and which Spain is now trying to avoid. The International Monetary Fund and other lenders had to bail out Iceland, which remains outside the EU, and […]