| Summary: | 碩士 === 東吳大學 === 國際經營與貿易學系 === 104 === When Iceland experienced an economic crisis in the autumn of 2008, the whole world witnessed the collapse of the financial system of the entire country. Because of the Icelandic financial industry’s serious separation from the real economy, excessive expansion and unreasonable fund source structure, the three main banks of Iceland were closed within one week; Icelandic króna depreciated by 70% in total; both inflation rate and interest rate rose to 18%; unemployment rate rose drastically from nearly 0% to nearly 10%; and Iceland’s default on its debt seemed to be an inevitable outcome. Although Iceland, once being “the happiest country,” faced “national bankruptcy,” the country started its recovery very soon. Iceland not only showed to the world the enormous destructive power of financial turmoil, but also exposed the extreme vulnerability and problematic development of the financial industry. Having confronted such a great crisis, the Icelandic government took some unconventional measures from the mid-2009. Since Iceland all along implemented a political strategy that pursued harmonious social and economic development, the government substantially cut expenditures and increased incomes to reduce financial deficit, and adopted progressive tax system to make the high-income people pay more tax and the low-income people protected. Besides, reduction rate of social welfare spending was lower than that of other public spending. This strategy finally achieved the expected effect, and the net national income distribution of people became fairer. Nevertheless, with government policy not being the only factor, there are other factors facilitating the economic recovery of the nation, such as the Icelandic government’s handling ways of the problems of the local banking industry, their acceptance of assistance from IMF, and the depreciation of the Icelandic króna that created favorable conditions for export. All these practices made the economy of Iceland gradually revive, and finally recovered. These experience and lessons that Iceland went through can be a good reference for other European countries having similar backgrounds.
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