erfiðleikarnir

Erfiðleikarnir, also known as the Icelandic Difficulties, refer to a series of economic and political crises that Iceland experienced in the early 21st century. The term was coined by the Icelandic economist Ásgeir Jónsson to describe the complex interplay of factors that led to the country's financial collapse in 2008.

The Icelandic Difficulties can be attributed to several interconnected issues. Firstly, the country's heavy reliance on the financial sector, particularly the banking industry, led to a significant exposure to international financial markets. This vulnerability was exacerbated by the global financial crisis of 2008, which resulted in a sharp decline in the value of Iceland's financial assets.

Secondly, the Icelandic government's decision to float the Icelandic króna in 1991, instead of pegging it to the German mark, allowed for greater economic flexibility. However, this also made the country more susceptible to external shocks, as the value of the króna was subject to market fluctuations.

Thirdly, the lack of diversification in Iceland's economy meant that the country was heavily dependent on a few key industries, such as fishing and aluminum smelting. The global downturn in these sectors further strained Iceland's economy.

The combination of these factors led to a severe economic crisis in Iceland, with the country's GDP contracting by 11.5% in 2008. The crisis also had significant political implications, with the collapse of the ruling coalition and the resignation of the prime minister. In response to the crisis, Iceland implemented a series of austerity measures and sought international financial assistance to stabilize its economy.