The Icelandic financial crisis unfolded after more than a decade of economic deregulation. By 2007, Iceland’s internationally oriented financial system had rapidly grown out of proportion, expanding to nearly tenfold of Iceland’s GDP. In October 2008, Iceland’s financial sector dramatically collapsed in the space of a week and the country became the first Western European country in twenty-two years to enter into an IMF program. The popular outcry was strong and the public protests that ensued facilitated the ousting of the ruling coalition in early 2009.
In response to the economic collapse, Iceland adopted a raft measures to address issues of accountability. A parliamentary appointed Special Investigative Commission provided in-depth analysis of the banking collapse and critical evaluation of governance failures. Civil society activity spurred the adoption of a constitutional reform process that later stalled, and in the first, and to date only, trial of political leader over actions associated with the global financial crisis, the former Prime Minister of Iceland was brought before a special court and was found guilty of one out of four charges.
The measure that has arguably garnered the greatest attention abroad was Iceland’s establishment of an Office of a Special State Prosecutor. The office was tasked with investigating and bringing charges for illegal activities involved in bringing about the crisis. By early 2016, twenty-nine bankers had been successfully prosecuted and many of them received extended jail sentences.
Population: 331,918 (July 2015 est.)
|GDP||$10.59 billion||$12.28 billion||$15.15 billion|
|Public Debt (% of GDP)||31.6%||113.9%||81.9%|
|1990s||Financial deregulation and privatisation|
|4-5 October 2008||Run on a branch of Landsbanki by UK and Dutch deposito|
|Mid-Oct 2008||Icelandic governments take three largest banks into receivership|
|Oct/Nov 2008||Iceland applies for emergency IMF assistance, and IMF offers $2.1 billion standby programme over two years|
|December 2008||Special Investigative Commission created by Parliament to investigate the causes of the banks’ collapse.|
|January 2009||Public protests lead PM Geir Haarde to call for an early election; Social Democrat Johanna Sigurdardottir replaces him, putting a centre-left coalition in government|
|April 2010||Special Investigative Commission report published, condemning both bankers, public administrators, and politicians for ‘failing to respect their primary obligations’|
|January 2013||Iceland absolved by European Free Trade Association Court of not sufficiently protecting Icesave accounts|
|May 2013||Centre-right coalition of the Progressive and Independence parties replace Social Democrat-Green alliances|