The financial markets appeared to have got the jitters again last week as the value of equities tumbled and some eurozone members experienced a widening of the spread between their respective long-term government bonds and the German bund.

Malta should also seek to draw its own conclusions – the most notable one being that we cannot afford to be reckless neither from a monetary perspective nor from a fiscal one- Lawrence Zammit

Although in the past I often expressed a very negative opinion on the activities of the speculators and how these were creating an artificial crisis in the financial markets, this time I feel much less inclined to do so.

Last week investors were reacting to a number of developments that have suddenly generated storm clouds.

We have had protests in Spain against the austerity measures introduced by the new government.

We have seen the Italian government being forced to retreat from some of the positions it had taken previously and political parties promising to make changes to the policies of the Monti government once in power.

We have had a defeat in France of the only leading politician in that country who believes in the correctness of the EU fiscal compact (Socialist candidate François Hollande, who was placed first, has promised that he would renegotiate the agreement, while the extreme right candidate, Marine Le Pen who placed third wants France to exit the euro).

We have had the resignation of the Dutch government as it perceived that it no longer had the necessary support for the fiscal consolidation policies it was following.

The International Monetary Fund has not managed to get the necessary support for its global stability fund (only €302.5 billion were pledged instead of the expected €530 billion).

The government of Argentina is speaking of nationalisation of certain companies that are too important to fail.

Need we continue? Maybe each individual news item was not so catastrophic. However, when one looks at them in their totality, one notices a weakening of the resolve there was to resolve the financial and economic crisis.

Yet we have had one country that slowly, and gradually, has come back from the abyss it was facing.

I am referring to Iceland which in 2008 faced bankruptcy.

This country’s example should teach us all that the current crisis can be resolved if governments do not lose their sense of direction.

Iceland was one of the first victims of the global crisis but its economic outlook is improving. Many praise the bold step it took to try a former political leader and bankers for their role in the crisis.

To get a sense of the dimension of the crisis that Iceland has faced, one needs to look at some numbers, which are indeed shocking.

Between 2007 and 2009, the gross domestic product fell by 10 per cent and unemployment rose sevenfold.

The three biggest commercial banks collapsed and defaulted on debt amounting to €64 billion.

The currency (the krona) depreciated by 50 per cent and the average household has suffered a 30 per cent fall in purchasing power since 2008.

The International Monetary Fund was asked to intervene and support the country through loans and the imposition of tight economic policies.

To get out of the crisis, Iceland devoted its energies to productive activities – in its case that meant tourism and fishing and other natural resources.

It reintroduced financial regulation, which had been put aside for several years and allowed its banks to default on their loans.

As a senior executive at Icelandair said, before Iceland was working with other people’s money, now it is working with the real things – fish and tourists.

The result was that Iceland’s debt was upgraded from junk status to investment status by the credit agency, Fitch. Its GDP rose by 2.5 per cent each year in the last two years. It has now applied to become a member of the European Union.

Problems remain in Iceland but it appears to have found solutions those at home.

The nation still owes substantial sums of money to other states however.

Households are still highly indebted and investors are not that keen to invest in the country.

On the other hand, it has brought to account the bankers who caused the crisis through their recklessness.

In fact, recklessness is certainly not one of Iceland’s current problems.

The Iceland story should be seen as an example to follow by a number of countries. Malta should also seek to draw its own conclusions – the most notable one being that we cannot afford to be reckless neither from a monetary perspective nor from a fiscal one.