During the course of history, the Icelandic population relied mostly on fishing industry and agricultural production as their main resources. The volcanically and geologically active European Island country in the North Atlantic Ocean, placed on the Mid-Atlantic Ridge has a population of about 320,000 and a total area of 103,000 km2 (40,000 sq mi), two-thirds of which are located in capital city Reykjavík and the surrounding area.
Iceland's economy was transformed after World War II with the industrialization of the fisheries. In 1994, Iceland joined European Economic Area and diversified national economy into both economic and financial services industry.Before the global financial crisis Iceland was at the very top among the 177 countries in UN statistics which compared per-capita income, level of education, health care and life expectancy.
Averaging at 80.55 years for males, life expectancy was third highest in the world. Iceland provided a free health and education system, where inhabitants were encouraged to learn and invest in new technologies.
The result was also visible in the statistics, since the country was ranking high in the number of books bought, people owned most mobile phones per head in the world. At one time Iceland had the highest proportion of working women on the planet. A small country was believed to be a modern economic miracle.
The economic growth was based on the extremely fast expansion of the national banking system. Not many people could even imagine that the same system would burden the country with liabilities in excess of $100 billion. The government sought ways to avert financial meltdown but the inevitable happened. In 2003, Iceland's three biggest banks had assets of only a few billion dollars, around 100% of national gross domestic product.In the following three and a half years they grew to over $140 billion and became several times greater than national GDP.
The percentage of growth was of the charts. It was probably the most rapid expansion of a banking system in the human history. The banks were easily lending Icelanders money to buy stocks and real estate, hence the value of Icelandic stocks and real estate went through the roof. From 2003 to 2007, the Icelandic stock market multiplied by nine times while Reykjavík real-estate prices tripled.
The Icesave brand issue
Icesave was an online savings account brand owned and operated by the Landsbanki bank from 2006–2008 that offered savings accounts. The base of operations was in two countries, United Kingdom and the Netherlands. Under marketing slogans such as "clear difference" or "the transparent savings bank" it offered personal savings accounts to interested investors. They attracted over 300,000 customers in the United Kingdom, with deposits of more than €5 billion and 125,000 customers who deposited €1.7 billion in the Netherlands.
When the banks collapsed in 2008, a diplomatic dispute centred on the retail creditors of the brand arose between the countries involved. As a result of the catastrophic collapse more than 400,000 depositors with Icesave accounts were unable to access their money for two to three months, while waiting for payout from the Deposit Guarantee Schemes in their home countries. United Kingdom government decided to use of the anti-terrorism legislation against Iceland to freeze the remaining assets of the failed banks abroad, which raised multiple questions and brought negative tensions between the two countries.