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But crucially, it let its privately owned banks, which had caused the crisis, die. Investors lost everything which meant taxpayers were not burdened with their banking debt as well.
Also and most controversially here, British and Dutch savers in Icelandic banks lost all their money (collectively worth €4bn) and had to be repaid in full by London and The Hague respectively.
The medicine was tough and the response immediate. Growth collapsed, thousands emigrated and Iceland became an outcast in the international financial community having been downgraded to “junk” status.
But then in the middle of the dark and cold winter of 2010 something happened. Iceland’s exporters, which had struggled to recruit skilled graduates because they were being poached by bonus-paying banks for a decade, got the engineers, scientists, IT graduates and brainpower that they needed.
Ossur, which manufactures the prosthetic running blades that athlete Oscar Pistorius has made famous, is one company which has benefitted from the crisis, now finding it easier to recruit skilled staff than during the reign of the banks.
Its CEO Jan Siggursson has a message for Britain with its still dominant banking sector: “Don’t depend on a phoney economy. It was not real and we understand that now. This was complete bubble. The financial business is necessary, don’t get me wrong, but it is a very dangerous business because it sucks the best and it’s not real. And the longevity of the financial business is not there. It’s very easy to copy and it is not long term.”
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