Iceland’s central bank today slashed its key policy rate for the first time since 2003 in an unscheduled announcement as the country remains perhaps the hardest hit in the financial crisis. The nation fell into crisis last week on concern that the Icelandic authorities couldn’t back up debt obligations of the struggling, almost entirely domestic-owned banking sector. Meanwhile, international trading in the krona has since all but stopped due to low confidence in the currency. Amid such broad turmoil, sometimes the plight of the average citizen gets lost. Sigríður Hagalín Björnsdóttir, an Icelandic journalist, writes from Reykjavík to a friend in New York.

Hallgrimskirkja, a modernist church in Reykjavik, Iceland. (Getty Images)

Thanks for asking how we are — we’re fine, although the situation here is very strained. It’s such a strange feeling, having your entire perception of reality changed so drastically in a few days. Until these past weeks, we were living in one of the richest countries in the world, and although we were a little worried about the economy, nobody would have imagined anything like this storm. Now, all our biggest banks are bankrupt, our currency is basically dead, it may be difficult to buy food, oil and other necessities from abroad, and we even fear that we might lose our country, just like happened to Newfoundland. Hundreds of people are losing their jobs, many more might be losing their homes, and people’s life savings are either lost or drastically reduced. People are scared for the future, that our state may actually go bankrupt.

Everybody is very tired — watching your country suffer like this is almost like watching someone you love become ill, it’s like suffering from a broken heart. Most of our tycoons seem to have left the country, and the government is under police protection — a first — but it doesn’t seem like people are angry or aggressive. We are stunned, very surprised, that this expansion adventure that made a few people very rich but didn’t really affect the general public, has turned out this disastrous. Yes, people here bought expensive cars, and allowed themselves an annual trip to Copenhagen or to a Spanish beach, but most of us kept working 10 hours a day and kept on as we have always done.

There is also a sense of hope and unity, even a sense of humor — people seem determined to go on with their lives, even if it will be a bit harsh for a while. You can hear people all around say things like: we survived the terrible volcanic eruptions of the 18th century, we survived the frost winter of 1918, we survived famines, Black Death, earthquakes, we’ll survive this. Families and friends are coming together for dinners and chats, at night there are candles burning in the windows in most houses here, and inside people are sitting together, talking, talking, talking. Most of us are hoping something positive will come out of this, that our greed, arrogance and materialism will be replaced by care and gratitude for the more important things in life.

My family and friends are not affected by the storm yet; most of us are government workers, teachers, doctors, journalists etc., and not part of the jet set. None of us have been particularly patriotic up until now, most have lived for long periods of time outside Iceland. Now, however, we feel fiercely loyal to our nation, basically a big extended family, grandchildren of farmers and fishermen, who lost their way on the international markets.