G3-247 Report ICELAND
and Norway split into two separate kingdoms and Iceland remained a Danish dependency. The country became independent in 1918 and a repub- lic was declared in 1944.
Prior to the 20th centuries the Icelanders relied heavily on fishing and agriculture and was one of the least developed in the region. But during the war and post war the country prospered as indus- trialisation of the fisheries brought prosperity and by the 1990s the country was one of the wealthi- est and most developed nations in the world.
Today it has a free market economy with relative- ly low corporate taxes and maintains a Nordic social welfare system providing universal health care and education. In 2013 it was ranked as the most developed country in the world.
Between 2003 and 2007 following privatisation of the banking sector, under the government of David Oddsson, Iceland moved towards having an economy based on financial services and invest- ment banking.
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Then in 2007 the country was hit hard by the recession and the country witnessed a major financial crisis involving the collapse of all three of the country’s major privately owned commer- cial banks.
Prior to the crash the country’s three largest banks Glitnir, Landsbanki and Kaupthing had a combined debt exceeding six times the nations GDP of €14bn.
In October 2008 the Parliament passed emer- gency legislation to minimise the impact of the crisis and took over the domestic operations of these banks. They also made it illegal to move money out of the country.
New banks were established and the old banks were run into bankruptcy. Iceland’s external debt reached €50bn by mid 2008 and more than 80 per cent of this was held by the banking sector.
The bank Kaupthing was the worst hit. Its glass headquarters once sat on the waterfront in Reykjavik and the bank had operations in Europe,
01 Today it is one of the most developed countries in the world and Icelanders have the second highest quality of life in the world. Despite Iceland’s decision to resume commercial whale hunting in 2006 tourism is also expanding especially in eco tourism and whale watching. The country sees around 1.1 million visitors a year.
02 Last year some 781,000 foreign tourists visited Iceland which is an increase of 20 per cent whilst in Reykjavik 1,100 additional hotel rooms are currently being built. This includes the first five star hotel in the city with 250 rooms.
North America and the Middle East. Its balance sheet was at one time four times as large as the annual economic output of the entire country.
But as the dust settled after the crisis, from the ashes new banks have emerged. It’s not all good news however. Due to rising inflation many home owners pay more than what they initially bor-
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