As the world suffers a hangover from the financial excesses of the past few years, the tiny island nation of Iceland has a bigger headache than most. The Nordic country was until recently lauded for its rapid generation of wealth despite its small size, as deregulation of domestic financial markets in the 1990s fuelled a stock market boom that underpinned an acquisition spree by cash-rich Icelandic banks and other companies.
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With a population of just 320,000 people, the remote island nation between Europe and Canada has punched far above its weight in recent years, shifting from its mainstay fishing industry into an international investment force. The Iceland Stock Exchange, or ICEX, was Europe's top-performing market in 1994, leaving Icelandic companies with a large liquidity pool. Kaupthing, Iceland's biggest bank, has doubled in size every year since 1996.
According to one local observer, this is escaping the financial world and into daily life:
They are fighting powers that they are powerless to fight. It's like tackling a storm raging in the sea with a teaspoon.
The main supermarket can't get imported goods because they have no currency. The shops are half empty. One of the store managers has advised people to start hoarding. We're running out of oil. And winter came last night - about a month early.
H/T and sympathy to Steinn Sigurðsson, who has his own report; comments there please.