This paper gives an account of the characteristics of the Icelandic financial and economic crisis. Then we outline the political developments in 2009 and the policy emphasis of the social democratic-left green government that assumed power in early 2009. The stated goal of the government was to pursue social democratic policies/Nordic welfare policies in order to shelter ordinary families against the crisis as possible. This was no doubt difficult to achieve, given that governmental finances were devastated by the crisis, with great needs for reducing the public deficit, either by expenditure cuts or tax increases – or both. In order to assess the effects of the crisis on family welfare we document real pay and wage developments through 2009 and partly through 2010, tax and benefit policies, minimum pensions and minimum pay, as well as reviewing the many measures aimed at relieving excessive debt problems of households and unemployment problems. Then we give an account of other important indicators of level of living and hardship consequences of the crisis, such as numbers of social assistance seekers and nationally representative replies of the population to survey questions about material deprivation and financial hardships. We compare outcomes for these issuers during the crisis years of 2009-2010 as well as from previous years (2004-2008). Lastly we assess the degree to which the stated policy goals have been achieved so far. The findings indicate that the goals of sheltering lower and middle earning households against the worst consequences of the crisis have to a significant degree been achieved in Iceland. This outcome seems to deviate significantly from the paths undertaken in Ireland and the UK.
