Iceland. The year became the most dramatic for Iceland since independence. After a severe earthquake in which about thirty people were injured, the nation experienced the cheer of Olympic silver in handball and then thrown into a financial crisis that seemed to be the worst in the world.
In the spring, I resumed the hunt for the election, despite the fact that the government was divided on the issue. Together with Norway, Iceland also returned to export whale meat to Japan for the first time since the beginning of the 1990s.
President Ólafur Ragnar Grímsson got his term extended by a fourth term without any election being held. At the beginning of August he swore in, since no other candidate has been nominated. The president then traveled to Beijing and led the Icelandic heirloom when the men’s national handball team conducted a sensational Olympic tournament and took silver. The cheer at home in Iceland knew no bounds.
- ABBREVIATIONFINDER: Click to see the meanings of 2-letter acronym and abbreviation of IS in general and in geography as Iceland in particular.
But the joy quickly turned into economic depression. The long overheated Icelandic economy, the risk capitalists ‘huge investments abroad, the banks’ soaring lending, rising inflation and a falling krone value made Iceland extremely vulnerable to the approaching global financial crisis. The value of the Icelandic banks’ liabilities and commitments was estimated at ten times the country’s GDP. This financial bubble burst after the US investment bank Lehman Brothers collapsed in September and the international loan market stopped.
The Icelandic krona collapsed in value against the euro. Iceland’s three leading banks Kaupthing, Landsbanki and Glitnir were short of money and forced to sell foreign assets. Through a crisis law, the parliament gave the government the opportunity to take control of the banks, which also happened – according to Prime Minister Geir Haarde to save the country from economic collapse. But in order to cope with the support of the banks and at the same time pay for the country’s imports, the government must borrow at least six billion dollars. Iceland turned to the International Monetary Fund (IMF), to the Swedish Riksbank and to the other Nordic central banks for assistance. But when, among other things, British savers’ accounts in bankrupt Icelandic-owned banks were frozen, the British government demanded deposit guarantees, a condition that was also supported in the Nordic and other EU countries. IN.
Iceland’s closest neighbors Norway and the Faroe Islands as well as Poland made loans without demanding Icelandic counterparts. In a speech, the president of I went into fierce attacks against the rest of the Nordic countries and tried to appease Russia by offering the closed US air base at Keflavík.
In order to try to curb rising inflation and defend the Icelandic krona, the central bank raised the key rate to 18 percent. Wages were lowered, notice was given and unemployment was expected to rise to 10 percent, while the country’s GDP is expected to decline by more than 8 percent in 2009. The financial crisis led to personal tragedies for Icelanders taking large loans in euros. Foreign guest workers left Iceland and several Icelanders chose to emigrate.
In Reykjavík, thousands of people demonstrated every Saturday demanding that the Governor of the Central Bank Davíð Oddsson resign and that new elections be held. At the same time, support for Icelandic membership in the EU grew to 70 percent in an opinion poll. The ruling Independence Party decided to postpone its national meeting until January 2009 and, in the light of the financial crisis, review its opposition to the EU and the euro. Coalition partner The Social Democrats demanded that Iceland apply for EU membership and move to the euro.
In mid-November, Iceland found it too good to accept the British and Dutch claims for compensation to those who lost savings when Icelandic banks went bankrupt. It increased Iceland’s debt burden, but meant that the country was given the go-ahead for loans from the IMF – the first time in 30 years for a western country. The loan package included $ 2.1 billion from the IMF and $ 3 billion from Sweden, Norway, Denmark, Finland, the Faroe Islands, Russia and Poland.
The opposition criticized the government for dealing with the financial crisis and demanded a vote of no confidence in the parliament. After a tough debate, however, the declaration of disbelief was voted down by the government’s majority.
The Icelandic krona lost almost half its value during the year. GDP had declined by several percent during the second half of the year, inflation had risen to just over 18 per cent in December and food prices had risen by more than 30 percent during the year.
According to Countryaah reports, the population of Iceland in 2008 was 320,217, ranking number 180 in the world. The population growth rate was 1.660% yearly, and the population density was 3.1953 people per km2.