Coming in from the cold Iceland has been tough with creditors and kind to itself. Ireland may wish it had done the same

the economist
"Iceland’s recuperation seems to offer two big lessons for Ireland and other troubled euro-zone countries. The first is that the extra cost to a country of not standing by its banks can be surprisingly small. Iceland let its banks fail and its GDP fell by 15% from its highest point before it reached bottom. Ireland “saved” its banks and saw its output drop by 14% from peak to trough.

A second lesson is that the benefits to a small country of being part of a big currency union are not all they were once cracked up to be. ......For all the euro’s faults, it is doubtful whether Icelanders would be keen to hold and use kronur if they were not forced to by capital controls. Easing these will be tricky. Local savers have little choice but to buy government debt, keeping yields artificially low. Firms and householders are overburdened with debts, some of which are indexed to inflation. House prices have plummeted, leaving many householders in negative equity. Around 40% of the new banks’ assets are non-performing. Not many Icelanders believe in recovery.

Even so, that Iceland’s economy has done little worse than Ireland’s is still a triumph. It has been tough with its creditors and disregarded some international norms—and recovered. Ireland has stood by its banks to the benefit of the wider European banking system. Its reward has been “rescue” loans at an interest rate that makes it hard to fix its finances. The next Irish government may look at Iceland and decide to play hardball with Europe. "