þriðjungur

þriðjungur is the Icelandic term for the financial crisis that unfolded in Iceland beginning in late 2008 and lasting through 2011. The word, meaning “tripartite” or “triple trouble,” reflects the triple collapse of the country’s banking sector, the government’s fiscal position, and the social fabric of Icelandic society.

The crisis began when Iceland’s major banks—Glitnir, Landsbankinn, and Kaupthing—expanded aggressively through foreign‑currency borrowing and leveraged lending. On 4 October 2008 the Icelandic Finance Minister, due to mounting pressure, ordered the three banks to be placed into receivership. The sudden collapse of the banking system halted credit, froze deposits, and triggered a liquidity crunch that spread to the entire economy.

The government was forced to assume liability for the banks’ massive foreign‑currency debt, ultimately defaulting on about US$16 billion of sovereign bonds. The economic contraction exceeded 35 percent of GDP in 2009, unemployment spiked to roughly 25 percent, and public confidence in the political system fell sharply. Mass protests and a wave of political resignations followed, culminating in a new coalition government in 2011.

Reforms implemented after the crisis included stricter banking supervision, a cap on foreign‑currency borrowing, the introduction of a national fiduciary board, and a shift in fiscal policy toward greater transparency and accountability. These measures have stabilized Iceland’s banking system and helped the country recover economically, though the crisis remains a cautionary example of the risks inherent in rapid financial liberalization.

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