The Reasons for and Results of the 2008 Financial Crisis on Iceland

Abstract

In a case study on Iceland, I carefully analyse a successful strategy for overcoming financial breakdown. The aim of article is to verify whether Iceland’s model could become a panacea for future crises. Various branches of the Icelandic economy are characterised, including the banking sector – the most important sector in a financial crash. Documents were analysed and data from the Hagstofa Islands were used to present essential indicators including GDP, trade balance and the unemployment rate. Source analysis method was then used to determine that the collapse of the financial sector was the main cause of the slump. Indirect causes such as the construction of a steelworks in Reyðarfjörður are also discussed. The events of the crisis are systematised, while the social and political situation are also considered. Changes in conditions of the state after the crash are provided and future forecasts about economic development are discussed. Ultimately, I reject the notion that Iceland’s model for overcoming the financial breakdown is a panacea for future crises. It is only applicable for particular cases.