Editing Iceland (section)

===Economic contraction===
{{main|2008–2011 Icelandic financial crisis}}
[[File:W16 Protesters 2659.JPG|thumb|[[2009 Icelandic financial crisis protests]]]]

[[File:Iceland bonds.webp|thumb|340px|Iceland bonds had an [[Inverted yield curve]] in 2008:
{{legend-line|#02529C solid 3px|10 year bonds}}
{{legend-line|#DC1E35 solid 3px|5 year bonds}}
{{legend-line|#929292 solid 3px|2 year bonds}}
]]

Iceland was hit especially hard by the [[Great Recession]] that began in December 2007 because of the failure of its banking system and a subsequent economic crisis. Before the crash of the country's three largest banks, [[Glitnir (bank)|Glitnir]], [[Landsbanki]] and [[Kaupthing]], their combined debt exceeded approximately six times the nation's gross domestic product of €14&nbsp;billion ($19&nbsp;billion).<ref name="bbc.1">{{cite news |url=http://news.bbc.co.uk/2/hi/europe/7852275.stm |title=Waking up to reality in Iceland |work=BBC News |access-date=27 January 2009 |date=26 January 2009 |archive-date=26 January 2009 |archive-url=https://web.archive.org/web/20090126205753/http://news.bbc.co.uk/2/hi/europe/7852275.stm |url-status=live }}</ref><ref>{{cite web |url=http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/creditors_call_time_on_iceland.html |title=Robert Peston |publisher=BBC |date=4 October 2008 |access-date=8 July 2009 |archive-date=7 October 2008 |archive-url=https://web.archive.org/web/20081007065042/http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/creditors_call_time_on_iceland.html |url-status=live }}</ref> In October 2008, the Icelandic parliament passed emergency legislation to minimise the impact of the financial crisis. The Financial Supervisory Authority of Iceland used permission granted by the emergency legislation to take over the domestic operations of the three largest banks.<ref>{{cite web |url=http://e24.no/spesial/finanskrisen/article2696518.ece |title=Gud velsigne Island! |publisher=E24.no |date=6 October 2008 |access-date=8 July 2009 |url-status=dead |archive-url=https://archive.today/20120702211413/http://e24.no/spesial/finanskrisen/article2696518.ece |archive-date=2 July 2012}}</ref> Icelandic officials, including central bank governor [[Davíð Oddsson]], stated that the state did not intend to take over any of the banks' foreign debts or assets. Instead, new banks were established to take on the domestic operations of the banks, and the old banks were to be run into bankruptcy.

On 28 October 2008, the Icelandic government raised interest rates to 18% ({{as of|2019|August|lc=y}}, it was 3.5%), a move forced in part by the terms of acquiring a loan from [[International Monetary Fund]] (IMF). After the rate hike, trading on the Icelandic króna finally resumed on the open market, with a valuation at around 250 ISK per euro, less than one-third the value of the 1:70 exchange rate during most of 2008, and a significant drop from the 1:150 exchange ratio of the week before. On 20 November 2008, the [[Nordic countries]] agreed to lend Iceland $2.5&nbsp;billion.<ref>{{cite web|url = http://www.norden.org/en/news-and-events/news/nordic-countries-provide-iceland-with-new-loan|title = Nordic countries provide Iceland with new loan|publisher = [[Nordic Council]]|date = 20 November 2008|access-date = 25 November 2013|archive-url = https://web.archive.org/web/20131203001844/http://www.norden.org/en/news-and-events/news/nordic-countries-provide-iceland-with-new-loan|archive-date = 3 December 2013|url-status=dead|df = dmy-all}}</ref>

On 26 January 2009, the coalition government collapsed due to public dissent over the handling of the financial crisis. A new left-wing government was formed a week later and immediately set about removing Central Bank governor Davíð Oddsson and his aides from the bank through changes in the law. Davíð was removed on 26 February 2009 in the wake of protests outside the Central Bank.<ref>{{cite news|url = http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5811719.ece|title = Iceland's central bank chief David Oddsson is forced out|last = Gilmore|first = Gráinne|date = 27 February 2009|work = [[The Times]]|access-date = 22 April 2010|location = London|archive-date = 9 August 2011|archive-url = https://web.archive.org/web/20110809172139/http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5811719.ece|url-status = dead}}</ref>

Thousands of Icelanders left the country after the collapse, many of those moving to Norway. In 2005, 293 people moved from Iceland to Norway; in 2009, the figure was 1,625.<ref>{{cite web|url = http://www.nrk.no/nyheter/distrikt/rogaland/1.7190612|title = Islandsk innvandringsboom til Norge|publisher = NRK|date = 30 June 2010|access-date = 27 July 2010|language = no|archive-date = 23 October 2012|archive-url = https://web.archive.org/web/20121023051615/http://www.nrk.no/nyheter/distrikt/rogaland/1.7190612|url-status = live}}</ref> In April 2010, the Icelandic Parliament's Special Investigation Commission published the findings of its investigation,<ref>{{cite web|url = http://sic.althingi.is/|title = Althingi&nbsp;– Report of the Special Investigation Commission (SIC)|publisher = Sic.althingi.is|date = 12 April 2010|access-date = 7 November 2010|archive-date = 23 February 2011|archive-url = https://web.archive.org/web/20110223192152/http://sic.althingi.is/|url-status = live}}</ref> revealing the extent of control fraud in this crisis.<ref>{{cite web|last = Gylfason|first = Thorvaldur|url = http://www.voxeu.org/index.php?q=node/4965|title = Iceland's special investigation: The plot thickens|publisher = VoxEU.org|date = 30 April 2010|access-date = 7 November 2010|archive-date = 13 June 2010|archive-url = https://web.archive.org/web/20100613194801/http://voxeu.org/index.php?q=node/4965|url-status = live}}</ref> By June 2012, Landsbanki managed to repay about half of the [[Icesave dispute|Icesave]] debt.<ref>{{cite web|url = http://www.icelandreview.com/icelandreview/daily_news/Half_of_Iceland%E2%80%99s_Icesave_Debt_Repaid_0_391042.news.aspx|title = Half of Iceland's Icesave Debt Repaid|work = Iceland Review|date = 19 June 2012|access-date = 20 June 2012|archive-url = https://web.archive.org/web/20120622043433/http://www.icelandreview.com/icelandreview/daily_news/Half_of_Iceland%E2%80%99s_Icesave_Debt_Repaid_0_391042.news.aspx|archive-date = 22 June 2012|url-status = dead}}</ref>

According to [[Bloomberg L.P.|Bloomberg]] in 2014, Iceland was on the trajectory of 2% unemployment as a result of crisis-management decisions made back in 2008, including allowing the banks to fail.<ref>Omar R. Valdimarsson (27 January 2014). [https://www.bloomberg.com/news/2014-01-27/let-banks-fail-becomes-iceland-mantra-as-2-joblessness-in-sight.html "Let Banks Fail Is Iceland Mantra as 2% Joblessness in Sight"] {{Webarchive|url=https://web.archive.org/web/20150108002433/http://www.bloomberg.com/news/2014-01-27/let-banks-fail-becomes-iceland-mantra-as-2-joblessness-in-sight.html |date=8 January 2015 }}. [[Bloomberg L.P.|Bloomberg]]. Retrieved 29 January 2014.</ref>