In the second half of last year, as the subprime crisis gathered strength in the US, articles appeared in the international press about Iceland as the "canary in the mine". They suggested tiny Ice- land (population: 315,000) was a leading indicator of how the crisis was mutating into something much bigger, affecting many countries beyond the US.

Since then Iceland's economy has continued to decline. Gross domestic product shrank by almost 4 per cent in the first quarter of 2008 compared with the final quarter of last year, when growth was barely positive. The stock market and the currency have both fallen by about a third since the start of this year.