áfallið

Áfallið, often translated as "the crisis" or "the collapse," refers to a period of significant economic and social upheaval in Iceland that began in 2008. The primary cause was the rapid and unsustainable growth of Iceland's three major banks, Kaupthing, Landsbanki, and Glitnir, which had expanded aggressively through leverage and acquisitions. When global credit markets tightened due to the subprime mortgage crisis in the United States, these banks, which were disproportionately large compared to Iceland's GDP, faced a severe liquidity crunch.

The Icelandic government was unable to bail out the banks due to their immense size, leading to their nationalization in October 2008. This triggered a sharp devaluation of the Icelandic króna, a stock market collapse, and widespread job losses. Many businesses struggled or failed, and individuals faced difficulties with mortgages and savings.

In response, Iceland implemented capital controls to prevent a complete flight of money from the country and sought assistance from the International Monetary Fund (IMF). The government also embarked on a process of economic recovery, which involved restructuring the banking sector, imposing austerity measures, and diversifying the economy. While the crisis was deeply impactful, Iceland's economic performance began to improve in the years following, with a notable recovery in tourism and other sectors. The term "áfallið" remains a significant point of reference in modern Icelandic history, representing a period of intense challenge and subsequent resilience.