iceland

Iceland’s Recovery

Iceland’s Recovery

Iceland’s crisis was brutally severe. With a bloated current account deficit and bad debts, Iceland experienced a severe balance of payments crisis and banking losses. Iceland responded by:Not guaranteeing all banking debt. Many large banks failed and were seized by the government Allowing the currency to devalue by 50%. Imposed capital controls to prevent the outflow of money.This response is in contrast to countries like Spain and Ireland. In Ireland, the government implemented a very costly bank bailout – which in turn caused…