"Every Cloud Has A Silver Lining"

As Iceland’s economy was struggling to cope, the Krona was getting worse and worse. Hence it was suggested that Iceland should become part of the European Union so that the currency would be converted to the Euro, instead of the Krona. However if Iceland joined the EU it would have to adhere to EU policies, including the policy on fishing rights. Since Iceland is such a great fishing community, Icelanders were against this change and refused to become a member of the EU. 

Nonetheless Iceland's debts were still not reimbursed so something had to be done immediately to fix this. Who could Iceland turn to for help in these dark and depressing times? The International Monetary Fund (IMF) was the answer to Iceland’s problems. On the 24^th October 2008 the IMF granted Iceland $2.1 billion. Iceland also received loans from other countries, including Sweden and Russia. In total Iceland received $5 billion to help repair its financial requirements.

How did the IMF step in to deal with Iceland’s crisis? With the Krona declining, debt service was getting costly so the IMF focused on making the Krona stable to stop further damage and defaults occurring. To bring the Krona nearer to its true value the IMF increased interest rates for a short period of time using fiscal policy. In 2011 the IMF deal was officially completed on the 26^th August. Professor Joseph Stiglitz from Columbia University believes that Iceland defaulting was the correct thing to do as he assumed “it would have been wrong to burden future generations with the mistakes of the financial system”.