Iceland's meltdown: the rise and fall of international banking in the North Atlantic

• Main Authors: Wade, Robert Hunter, Sigurgeirsdottir, Silla
• Format: Article in Journal/Newspaper
• Language: English
• Published: Centro de Economia Política 2011
• Subjects: HC Economic History and Conditions; HG Finance; North Atlantic
• Online Access: http://eprints.lse.ac.uk/44541/; http://www.scielo.br/scielo.php?script=sci_serial&pid=0101-3157&lng=en&nrm=iso

This paper shows how rapid privatization and liberalization of Iceland's small local banks around 2000, combined with well-developed crony relations among the elite, enabled a small group of financiers to leverage government-guaranteed deposits into a vast wave of mergers and acquisitions abroad, and redistribute enough of the profits back home to make the economy boom. Negative policy feedback loops were systematically undermined. The incoming left-wing government, with IMF support, has managed to protect the bulk of the population from the worst of the effects.