Iceland- Cracks in the crust ( lessons)

ECONOMIST: Iceland’s banking collapse is the biggest, relative to the size of an economy, that any country has ever suffered. There are lessons to be learnt beyond its shores.

From the central bank, the view of snow-dusted Mount Esja across the estuary is blocked by a half-finished grey edifice, sprawled like a dead whale across the harbour-front. This was to have been Iceland’s most spectacular building, crowning 15 years of economic growth: a concert hall facing out to the North Atlantic, covered in glass prisms imported from China meant to resemble glaciers and lava. But since the collapse of the bank that led the funding, construction has almost ground to a halt.

Likewise, blocks of half-built luxury flats stand half-finished along the waterfront. Instead of glass prisms, Icelanders are looking forward to a different Chinese cargo in the dying weeks of the year: fireworks. They set off more per person each new year than any other country in the world. Such is the demand that the Chinese manufacturers are making a special loan to Icelanders to buy them, according to a local newspaper.
Many workers have been laid off but, thanks to Iceland’s labour laws, they have three months’ notice, so the impact is not yet being fully felt. Many young Icelanders, who have never known unemployment, are expected to lose their jobs as businesses shut down. Vilhjalmur Egilsson, head of the Confederation of Icelandic Employers, the main business organisation, says that “corporate Iceland is technically bankrupt” because of its foreign debts. It is unable to refinance loans because the new capital controls mean all credit to the country has dried up.
With unemployment rising, citizens talk openly about defaulting on their home and car loans (those flashy Range Rovers are now known dryly as “Game Overs”).