Iceland’s response to economic crises: A success story?

The economic crisis that burst in 2007 was one of the harshest-if not the harshest- in the recent history. Companies, households and whole economies were affected. Starting from the USA and later expanding to the western countries, the consequences of the crisis were severe for some countries even within the European Union. Iceland is one of first the countries in Europe that experienced the crisis and its consequences. On October 2008, the country saw the financial system collapsing. Iceland experienced an economic bubble which can be related and compared to the one that took place in the USA. The great difference, though, was that the enormity of the Icelandic crisis could not be compared to its small size. In a short period of time, Icelanders, as well as British and Dutch, lost their money. No signs were taken seriously in the previous years, leading to a complete disaster of the economy. The purpose of this article is to examine the factors that caused the 2007 crisis and why Iceland was so badly affected. Were there any signs of the forthcoming disaster? Could it all have been prevented and, if so, in what price? These are the questions that we would like to answer in order to understand this crisis and prevent a future one.