Iceland

Iceland is a small but rugged country far from anywhere that has suffered from financial wreckage as severely as any in the developed world after Iceland’s overstretched banks failed in 2008.

Nobody has been able to put an overall price tag on the meltdown, though some estimates run to $10 billion, $30,000 for every man, woman and child in the country. The bank collapse alone is expected to cost taxpayers nearly $3 billion, on top of another $3 billion the government has invested in the new nationalized banks built on the wreckage of the old. More than $5 billion has been pledged to pay out foreigners who deposited money in the collapsed banks, mainly in Britain, whose action in using counterterrorism laws to freeze an Icelandic banks' assets in October 2008 is widely regarded here as having started the collapse.

In 2011, the British and Dutch governments took steps to sue Iceland to claw back the billions of euros they paid to depositors in their countries after Icelandic banks collapsed.

With assets eight times the country’s gross domestic product, the banks could not depend on the government to bail them out as some European countries, like Ireland and Britain, had done for their banks.

As a result, the 400,000 depositors in Britain and the Netherlands, who had been lured by the high interest rates of Icelandic banks, were reimbursed by their governments. Those countries are now seeking to recover that payout, which approached 4 billion euros ($5.8 billion).

The prospect of legal action, likely to take more than a year to resolve in an international court, arose in April 2011 after Iceland’s voters rejected a deal for the country to repay Britain and the Netherlands over 30 years starting in 2016.

The government of Prime Minister Johanna Sigurdardottir had pushed hard for approval, arguing that Iceland, amid a financial rescue program backed by the International Monetary Fund, needed to put the issue behind it if it hoped to re-enter international financial markets and join the European Union.

But after a devastating recession and with animosity toward bankers still running high, Iceland’s electorate was not swayed.

The case will be taken up by the European Free Trade Association Surveillance Authority, an international court based in Brussels.