Iceland was the first European country to fall in the global financial crisis. When three Icelandic banks collapsed in 2008, the government had few options other than to also become the first European country to receive a bailout. The IMF loaned it $2.1 billion and neighboring Scandinavian countries – Denmark, Finland, Norway, and Sweden – provided another $2.5 billion.
Before the collapse, Iceland had been the world’s fourth richest nation. It was declared one of the best countries in the world to live in, according to the United Nations. But deregulation of the financial system allowed risk-taking with little government oversight. Then its banks collapsed and were nationalized and its currency rapidly lost value.
Like many European countries, Iceland is now operating under a strict austerity budget and is struggling to foster growth while also cutting costs and restore financial trust – in 2010, its loans were temporarily frozen when it refused to repay the British and Dutch governments for money those nations' citizens lost in Iceland's banking collapse.