Lessons from Iceland

While Iceland may seem far removed from Asia, the economic crisis it is facing offers lessons to all nations on what they should avoid so as not to end up in the same boat. At the end of last year, Iceland negotiated a $2.1 billion bailout from the International Monetary Fund and nationalised three of its largest banks -- Kaupthing Bank, Landsbanki and Glitner Bank -- which had begun defaulting on $62 billion of foreign debt. As a result of the banks' collapse, foreign investors fled Iceland, prompting the value of its currency, the krona, to drop 50% in one week in January alone. That means Iceland is enduring a pain eerily familiar to many...