Financial Crisis Causes Iceland’s Government to Collapse

With global recession in full force, governments are tested, and Iceland's government is the first in Europe to fail. "Mass demonstrations against the government have become daily events in Reykjavik," writes David Blair for the Telegraph. In 2007, Iceland's finance industry appeared robust; the island nation of 310,000, independent from Denmark since 1944, did not see much benefit in joining the European Union. "But it emerged that the country's banks had amassed liabilities equivalent to six times the island's entire economy," Blair reports. Major banks have been nationalized, economic growth is projected to decline by 10 percent, the krona has plummeted and the government borrowed $10 billion from the International Monetary Fund and other sources. With no quick fixes in sight, economic hardship sharpens the divide between conservatives and progressives. The nation may submit an emergency application for EU membership, allowing access to other financing and euro security, but that would require the approval of 27 members also fending off recession. – YaleGlobal