Aspect What Iceland Did Why It Was Different From Most Countries Immediate response Let the banks fail – the three biggest banks (Glitnir, Landsbanki, Kaupthing) were placed into receivership and liquidated rather than being bailed out. Most advanced economies opted for massive bail‑outs to keep major banks alive (e.g., the U.S. TARP, UK’s bank recapitalisations). Capital controls Imposed strict capital controls in early 2008 (limits on foreign exchange transactions, restrictions on outbound transfers). Capital controls were widely discouraged by the IMF and EU at the time; many countries kept borders open to preserve market confidence. Debt restructuring Negotiated sovereign‑debtor restructuring with private bondholders (the “Icelandic Icesave” dispute) and used haircuts on foreign‑held debt. ...
From the Ottoman Debt Office to IMF Conditionality: How the ‘State‑Within‑a‑State’ Model Lives On in Modern Structural‑Adjustment Programs IN THE late 19th century the Ottoman Empire, once master of three continents, found itself reduced to a financial ward of Europe. By 1875 its debts had become unpayable. In 1881 the Decree of Muharrem created the Ottoman Public Debt Administration (OPDA), a foreign-run body that took direct control of large chunks of imperial revenue. The OPDA was not merely a collection agency; it was a state within a state, employing more staff than the empire’s own finance ministry and answering to bondholders in Paris, London and Berlin rather than the sultan in Constantinople. This episode, often overlooked, offers a stark preview of how sovereign debt can be used to restructure a country’s political economy. Here are five lessons from the world’s first large-scale international debt takeover. High on a hill overlooking the Golden Horn, the massive, f...