Economist: Lessons from Iceland | Cracks in the crust

"Relative to Iceland’s size, the debt to IceSave depositors is bigger than the reparations demanded of Germany by the Treaty of Versailles. Iceland was uniquely overextended, but other countries, too, have big banking industries relative to the size of their economies supported by lots of borrowing. Britain is one. The balance-sheet of Britain’s banking system, at 450% of GDP, was half the (relative) size of Iceland’s at the end of last year. But that is still high. Like Iceland, Britain does not have a global reserve currency, such as the dollar or the euro, to draw on if it needs to act as lender of last resort. Among larger European countries, the British government’s exposure to its banking sector is by far the highest."