Iceland was the only European country that dared to default on the bankers. In February 2011 Iceland’s President Olafur R. Grimsson refused to sign a $5B bailout bill and told the bankers he was going to put the bill to a referendum. Although 44 of the 63 members of Parliament had passed the bill, Grimsson said he was responding to a popular demand for a plebiscite after more than 42K of Iceland’s 318K inhabitants signed a petition asking him to block it.
Icelanders absorbed some of the costs itself but forced foreign investors to take the biggest hit. Not deterred by horror stories about an “unthinkable economic demise” that have prevented countries like Greece and Portugal from defaulting, Iceland has proved that default was the best thing it could have done. As a result, not only has the economy not collapsed since last year, but its gross domestic product is expected to increase by 2.6% this year. Much of that growth is based on increased production, mainly in tourism and the fishing industry. In contrast, most other European economies are either stagnant or in decline. Even the Times article admitted that many economists say Iceland’s recovery was aided by the collapse of the banks.
(h/t Cliff at Rusty Idols)