Abstract
The chapter aims at investigating how the Icelandic welfare system was used to tackle the effects of the financial and economic crisis in 2007/2008. The chapter asks what main challenges the Icelandic welfare system had to face and how they have been met during the aftermath of the crisis that started in the autumn of 2008. The main challenges that Iceland faced in the aftermath of the financial collapse was increased unemployment, reduced real earnings, higher debt burden of households and businesses and collapsed governmental finances. The chapter primarily focuses on the welfare strategy part of the responses to the crisis and explains how Iceland managed to promote a welfare strategy despite the serious financial constraints. That strategy was primarily characterized by redistribution of welfare expenditures, with increased transfers to households and cuts in expenditures on services (healthcare and education) and on administration. Targeting of transfers on lower income groups was also increased and that helped to avert a significant increase in severe poverty during the crisis years.
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Notes
- 1.
The Treasury debt in 2012 was about 85 % of GDP and foreign debt was around 28 % of total debt (The Central Bank of Iceland 2012).
- 2.
The minister of social affairs appointed a committee in autumn 2013 to revise the family policy and to create an action plan for the period to 2020 but it has not yet presented its proposals (Velferðarráðuneytið 2008).
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Eydal, G.B., Ólafsson, S. (2016). Iceland: Welfare in a Deep Economic Crisis. In: Schubert, K., de Villota, P., Kuhlmann, J. (eds) Challenges to European Welfare Systems. Springer, Cham. https://doi.org/10.1007/978-3-319-07680-5_17
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