The Iceland 2008 Financial Crisis


Protests in IcelandThe Iceland financial crisis of 2008-2009 was an important economic crisis which involved the collapse of the three largest commercial banks in the country following their difficulties in refinancing their short-term debt and a bank run in the UK. Compared to the size of its economy, Iceland's banking collapse is by far the largest one ever suffered by a country in the History of Economics worldwide.

On the one hand the Giltnir bank would be nationalized. And on the other hand the biggest bank of Iceland, the Kaupthing, was declared bankrupt. The National currency was devaluated, the Gross Domestic Product of the country decreased in 5,5% in 2009.

The Iceland financial crisis caused a popular outcry movement in Iceland, which led to the holding of two national referendums about the assumption of debt of Icelandic banks.

Just three months after the financial bubble burst, Iceland overthrew his government and let their banks fail. In only two years, the country with only 320.000 of habitants, refuse twice through referendum to take responsibility for the huge bank debt of 6.700 million euros. The Prime Minister was condemned for negligence in having allowed such a financial bubble.

The two big political parties, which governed when the crisis burst while turning a blind eye at that threat, will again run for election next spring. Oddly enough, the salaries of those who are accountable for the havoc are still incredibly out of proportion.

But the society has changed. In one of the citizen assemblies the Minister of Foreign Affairs and leader of the Social Democrats snapped at those present “but, who do you think you are? You are not the Nation”. The boo was general. The desperate cry of the minister became his "political suicide".

© Plataforma creada por Alfonso Hinojosa - Profesor de Inglés de la E.O.I. de Santander