2018 marks the tenth anniversary of Iceland’s devastating financial crisis. The beginning of the end can be traced back to events that unfolded in 2007, when the internal dealings and quationable loaning practices of Icelandic banks put foreign investors on edge. With a sudden decline in trust of Icelandic banks, the króna sharply depreciated in 2008. Consequently, households debt skyrocketed to the equivalent to 213% of their disposable income. A combination of factors increased the difficulties for banks in overturning their short-term debt, and with the Central Bank of Iceland unable to act as lender of last resort, the banking system collapsed. What ultimately followed was a downward economic spiral that resulted in the financial crisis, arguably the worst in Europe. The resulting capital controls imposed in November 2008, a measure meant to gain control over the country’s financial situation, were finally lifted on March 14th, 2017.
Beyond the statistics, there are real people who were struck by the collapse, their lives changing overnight. When queried in the street, many people politely refuse to answer our questions, with a quiet shake of the head or a joke to divert the conversation. However, those who were willing—some even eager—to share their stories paint a vivid picture of the financial crisis and its lasting impact ten years on.
The first person to speak with us is a young man typing on his phone when we approach him. Was he personally affected? “I was young when it happened,” Oliver reveals. Still being financially dependent on his parents, he was not personally affected by the collapse of the banks. However, he tells us that he saw that “a lot of friends and their parents lost money.”
As a result, Oliver tells us, people began “changing their way of budgeting and thinking about how they spend their money. It seems that people are using more of their own money now rather than loans, which were very common back then, with people using money they didn’t have, like credit. It was common for people to heavily rely on banks, although they are more sceptical now and are more careful about how they spend their money”. M
“Careful” quickly becomes a keyword in our conversations. People are careful when engaging with our questions, careful when choosing their words and use the word “carefully” when describing their approach to their finances. “People are very careful,” Margrét and her colleague explain from behind the pristine white counter of a pharmacy. “Before the crisis, there were not many debts, but the crisis took a toll on the effect of spending power.” This in turn had a negative impact on everyone. People no longer trust the banks, Margrét reveals. “House loans, car loans, all loans greatly increased and people are very careful now.” M
Hildur, Flower shop owner
Small business owners depend on a stable customer base. Economic crashes are a prime destabilizer. Hildur though, did not notice a great personal impact of the financial crisis. But one thing she made very clear “the crisis consumed everything.” Since human beings don’t seem to be capable of evolving, the question of whether people seem to have learned anything at all from the events ten years ago brings a smirk to Hildur’s face. “Maybe for a couple of years.” What a nice way to say ‘no’. Apparently, “the crisis had positive sides as well though. More babies in 2009 for example”. What a nice present to the government. No worries, parents later struggled to find day care for them. More people sought higher education, tried to make the best out of the frustrating situation. So, is there a possibility for another crisis? Yes, “money thinking is back” said Hildur instantly. People are being warned, but again humans don’t learn. CS
Valgerður, Shop worker
A crisis like this can affect people’s lives dramatically. Valgerður remembers every minute of the events ten years ago. “When the economy crashed in 2008, banks told many people that their pending loan payments will be frozen to not affect people’s liquidity. However, this promise didn’t last long.” Soon, Valgerður and her husband were confronted with high interests and very much unfrozen loans. Eventually, the family couldn’t keep up with payments of 600,000 ISK a month and the bank decided to sell the apartment that they fought so hard for. Valgerður explained that “there were a few guys in Iceland, standing on your steps, knowing you will lose your apartment, and then buy it.” Both herself and her husband had to work long hours to get back to where they are now. Proudly she also mentioned, that their son was one of their greatest financial supporters. Other than money problems, such a crisis impacts a person’s mental health and stress levels.. “You know, there is gonna be another crisis again,” Valgerður said without even waiting for the question being asked. In her eyes, “the same people occupying the same positions and powers as ten years ago while living their own luxurious life are the main reasons.” CS
Hjördis leans over the glass tabletop at Pandora, hands folded before they gracefully fly into a furry of explanation. “In the beginning, nobody was was travelling abroad, nobody was spending anything. Now everything is the same as before, and that’s not good. Young people did not learn anything from the first crisis. But maybe people like me, who lived through the crisis, are not spending as much money today as I did before.” Unlike others we talked with, Hjördis discloses that, as a bookkeeper, she has “always trusted the bank.” M
Ten years have passed since Iceland’s financial collapse andand it becomes obvious that people have different opinions on the topic of the financial crisis. Some were more affected by it than others. Whether there will be another crisis is speculative. Financial specialists aren’t indicating that one is on the way, but the certainty of the people we spoke with about another collapse on the horizon speaks to the long lasting anxiety of the population, no matter the degree to which each individual was affected by the financial crisis.
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