l-o-m-o asked: Hello, i will be soon visiting Iceland, and I would like to understand a little bit better the current economical-social situation as well, as what happened in the aftermath of the economical crisis. Especially, I would be interested in knowing something about how the civil society organised itself and acted for dealing with the crisis and for moving forward. Could you suggest me any books/articles/documentaries? Thanks! P.S. Most likely I will soon bother you with several other questions. :)
Tough question. In very short, all the major Icelandic banks (3 banks) were privatized in the late 90s. They all grew enormously as international investment banks. All sorts of Icelandic companies began buying up foreign companies and entering new markets with the help of cheap loans from the Icelandic banks. Then suddenly the world’s interest rates went up and the Icelandic banks’ model collapsed. The Prime Minister addressed the nation with the now famous words “Guð blessi Ísland” (God bless Iceland) and explained how they were taking over the banks.
The independence party was largely put at blame, since under their rule, the banks were privatized and many regulatory institutions either lost power or were shut down. People were angry and Iceland saw its first riots in decades (previous riots were when we entered NATO).
A new coalition government was put in place (Left Green and Center-Social) and extra elections were held soon after which reinstated this new coalition. That government is still in power and is largely unpopular at the moment, since well they had and still have a lot of unpopular clean up to do (government spending cut 20% and taxes raised). The Icelandic economy is pretty stable at the moment, but protected by very negative restrictions on foreign trade put in place to stabilize the currency (ISK).
Regarding dealing with the crisis and moving on there is a lot of anger at certain politicians and at the former rock star businessmen of the financial boom. A big help in moving on is the Report of the Alþingi Special Investigation Commision.
You might want to listen to this NPR Planet Money podcast, watch Dreamland and the Inside Job. If you are super interested you might even read the Alþingi Special Report (excerpt in English). It is not as dry a read as you may think. There are several Icelandic books on the crash. At least one, Why Iceland, is available in English. Keep in mind though that the author is the chief economist of one of the banks. Gives him an inside look but is sure to give a certain bias.