kreppa

Kreppa is the Icelandic term for a severe economic downturn, typically understood as a recession or depression. In everyday Icelandic usage it denotes a prolonged period of negative growth, high unemployment, and financial stress that affects households, businesses, and public finances. The term is used in economic analysis and political discourse to describe crises that disrupt normal economic activity.

Historically, kreppa is closely linked to the Icelandic financial crisis of 2008, when the collapse of the country’s three largest banks triggered a dramatic loss of confidence, a sharp depreciation of the krona, and a substantial contraction of GDP. The crisis exposed weaknesses in financial regulation, rapid credit expansion, and heavy external indebtedness. The response involved government intervention, bank nationalizations, and the introduction of capital controls, alongside international financial support. Following these measures, the economy gradually stabilized and began a gradual recovery over the subsequent years.

Impacts of a kreppa typically include reduced consumer purchasing power, elevated unemployment, increased public debt, and social strain. Policy responses often combine monetary adjustments, fiscal measures, structural reforms, and supervision of financial institutions. In international crises, stabilizing the financial system and restoring confidence are central goals, while long-term recovery hinges on restoring external balance and competitive productivity.

Etymology and usage: kreppa is part of the Icelandic lexicon for economic distress and has parallels in other Nordic languages for similar downturns. While most prominent episodes in Iceland are linked to financial sector turmoil, the term can describe any severe economic downturn.