In honor of Kirstin Wiig’s Bjork impression on last night’s Weekend Update (embedded at the bottom).
2008-2009 Icelandic financial crisis
From Wikipedia, the free encyclopedia
The 2008-2009 Icelandic financial crisis is a major ongoing economic crisis in Iceland that involves the collapse of all three of the country’s major banks following their difficulties in refinancing their short-term debt and a run on deposits in the United Kingdom. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history. A growing number of economists have linked Iceland’s woes to the nation’s adoption of neo-liberal and ‘laissez-faire’ economic policies starting in the 1990’s.
The financial crisis has had serious consequences for the Icelandic economy; the national currency has fallen sharply in value, foreign currency transactions were virtually suspended for weeks, the market capitalisation of the Icelandic stock exchange has dropped by more than 90%, and a severe economic recession is expected.
In late September, it was announced that the Glitnir bank would be nationalised. The following week, control of Landsbanki and Glitnir was handed over to receivers appointed by the Financial Supervisory Authority (FME). Soon after that, the same organisation placed Iceland’s largest bank, Kaupthing, into receivership as well. Commenting on the need for emergency measures, Prime Minister Geir Haarde said on 6 October “There [was] a very real danger … that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy.” He also stated that the actions taken by the government had ensured that the Icelandic state would not actually go bankrupt. At the end of the second quarter 2008, Iceland’s external debt was 9,553 billion Icelandic kronur (50 billion euros), more than 80 percent of which was held by the banking sector. This value compares with Iceland’s 2007 gross domestic product of 1,293 billion kronur (8.5 billion euros).The assets of the three banks taken under the control of the FME totaled 14,437 billion kronur at the end of the second quarter 2008.
The full cost of the crisis cannot yet be determined, but already it exceeds 75 percent of the country’s 2007 GDP. Outside Iceland, more than half a million depositors (far more than the entire population of Iceland) found their bank accounts frozen amid a diplomatic argument over deposit insurance. German bank BayernLB faces losses of up to O1.5 billion, and has had to seek help from the German federal government. The government of the Isle of Man will pay out half of its reserves, equivalent to 7.5 percent of the island’s GDP, in deposit insurance.