Breytingaskeiði

Breytingaskeiði, commonly known as the "Icelandic Transformation," refers to a period of significant economic and social change in Iceland during the late 20th and early 21st centuries. This transformation was marked by rapid privatization, deregulation, and the expansion of foreign investment, particularly in the financial sector. The process began in the 1990s following Iceland’s economic liberalization and its accession to the European Economic Area (EEA) in 1994, which opened the country to greater integration with European markets.

One of the most notable aspects of breytingaskeiði was the rapid growth of Iceland’s financial sector, which became a major driver of the economy. Banks such as Kaupthing, Landsbanki, and Glitnir expanded aggressively, both domestically and internationally, through acquisitions and speculative lending. This period also saw the privatization of state-owned enterprises, including energy companies like HS Orka and telecom providers, which were sold to foreign and domestic investors.

The transformation had mixed effects on Icelandic society. While it contributed to economic growth and increased prosperity for many, it also led to rising inequality and concerns about over-reliance on the financial sector. The 2008 global financial crisis exposed vulnerabilities in Iceland’s economy, as the country’s banks collapsed, leading to a severe economic downturn and a subsequent sovereign debt crisis.

In response, Iceland implemented strict austerity measures, including the nationalization of failed banks and the prosecution of former bank executives for economic crimes. The breytingaskeiði remains a subject of debate, with some viewing it as a necessary step toward modernization, while others criticize its consequences, including the financial instability that followed. The experience has since been studied as a case study in economic liberalization and its potential risks.