fjármálahruni

Fjármálahrunið, often translated as the financial crisis, refers to the collapse of the Icelandic banking system in 2008. This event had profound and far-reaching consequences for Iceland's economy and society. Prior to the crisis, Iceland's three largest banks—Kaupthing, Landsbanki, and Glitnir—had expanded rapidly through aggressive borrowing, acquiring assets globally. Their balance sheets grew to many times the size of Iceland's gross domestic product.

The global financial crisis of 2008, triggered by the collapse of Lehman Brothers, exposed the extreme leverage and fragility of these Icelandic banks. As international credit markets froze, the banks were unable to refinance their substantial debts. This led to a rapid and severe liquidity crisis. On October 5, 2008, the Icelandic government passed emergency legislation that effectively nationalized the three major banks, breaking them up into "good" and "bad" banks.

The immediate aftermath saw the Icelandic króna depreciate sharply, leading to soaring inflation and a significant drop in living standards. Capital controls were imposed to prevent further outflows of money. The crisis necessitated a substantial bailout package from the International Monetary Fund (IMF). The Icelandic people experienced widespread job losses, business failures, and a loss of confidence in the financial system. The government underwent significant political upheaval in the wake of the crisis, with protests leading to the resignation of the Prime Minister. Recovery has been a long and challenging process, marked by austerity measures and structural economic reforms.