Interesting policy..."Bankrupt yourself out of debt"

Nearly three years after the Icelandic economy imploded, the country appears to be recovering, and some believe its approach may offer a possible solution to Europe's debt problems.

Iceland does not seem like a country in the grip of a crisis.

On my first day the sun was shining brightly and out in Reykjavik's main shopping area the shops and boutiques, the cafes and restaurants were busy. Indeed, Reykjavik seemed pretty much like any other prosperous northern European city. Yet Iceland was hit hardest by the credit crunch in 2008. Its current recovery is why Iceland is being held up as the model for an alternative way to deal with the debt that plagues so many economies. That is because when Iceland's banks went spectacularly bust, instead of pouring in billions of taxpayers' money to shore them up, Iceland just closed them down. Their debts were so huge that, in truth, the country had little choice. Nevertheless, it was a radical strategy. Iceland effectively said "stuff you" to the banks' creditors. Foreign debts were written off - including $8bn (£4.9bn) of deposits from savers in the UK and Holland. "Bankrupting your way to recovery," it has been called.

Same situation on a personal level. Husband's cousin & wife who are bankrupt manage to live a very comfortable life complete with car, foreign holidays and are exempt from tax. Seems to be the way to go if debts get out of control.

It just depends whether you want to be able to borrow money in the future. If you think you've currently got a good lot and have a stable, self-sustaining economy then fine, default.

http://icelandreview.com/icelandrevi...7862.news.aspx

Even if the credit raters upgrade Iceland in a couple of years to non-junk, it will never again achieve a high enough rating to borrow money at a decent rate. Furthermore, bankruptcy can leave you with legacies if it breaks other agreements - I believe Iceland still face the prospect of being thrown out of EFTA if the ESA court finds against them, which could do significant harm to their economy in the long run.