The paper examines whether the neo-liberal policies and lack of democratic corporatism (according to Katzeinstein 1984 and 1985) contributed to the scale of the 2008 economic crisis in Estonia and Iceland. It focuses on the states’ domestic decision-making processes, i.e. lack of corporatism, why they have not followed the corporatist model and the consequences associate with the rigid enforcement of the neo-liberal agenda in both states since early 1990s. Also, the paper analyses the political consequences of economic crisis in these two small states and to what extend lack of democratic corporatism shaped the political aftermath of the crisis. Hence, where these two small states worse hit by the crisis because of their rigid enforcement of the neo-liberal agenda and lack of corporatism? Would they have been better able to deal with the crisis if their domestic structure of decision-making would have been characterized by corporatism? Did the 2008 economic crisis led to political instability?
