Iceland's Economic Collapse and Unique Recovery

The global financial crisis of 2008 had an unprecedented impact on Iceland, resulting in a loss of nearly half of its economic output within two years, a loss ten times more severe than that experienced by the USA. This drastic collapse stemmed from Iceland's heavy reliance on banking and financial services, leaving it vulnerable when the subprime mortgage crisis unfolded. While many countries initiated bank rescues, Iceland took a radical approach by allowing its banks to fail, which initially sparked controversy but eventually paved the way for a slow and regulated recovery. This recovery is notable, as by 2016, Iceland restored its per capita GDP to pre-crisis levels, showcasing resilience and the capacity for economic rebirth amidst adversity.