Icelands Meltdown: The rise and fall of international banking in the North Atlantic

Vol. 31 No. 5 (2011)

Dec / 2011
Published December 1, 2011
PDF-English
PDF-English

How to Cite

Wade, Robert, and Silla Sigurgeirsdottir. 2011. “Icelands Meltdown: The Rise and Fall of International Banking in the North Atlantic”. Brazilian Journal of Political Economy 31 (5):684-98. https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/379.

Icelands Meltdown: The rise and fall of international banking in the North Atlantic

Robert Wade
Professor of political economy at the London School of Economics,
Silla Sigurgeirsdottir
Lecturer in public policy analysis at the University of Iceland
Brazilian Journal of Political Economy, Vol. 31 No. 5 (2011), Dec / 2011, Pages 684-698

Abstract

This paper shows how rapid privatization and liberalization of Iceland's small local banks around 2000, combined with well-developed crony relations among the elite, enabled a small group of financiers to leverage government-guaranteed deposits into a vast wave of mergers and acquisitions abroad, and redistribute enough of the profits back home to make the economy boom. Negative policy feedback loops were systematically undermined. The incoming left-wing government, with IMF support, has managed to protect the bulk of the population from the worst of the effects.

JEL Classification: E5.


Keywords: Iceland financial crisis privatization banking crisis