I posted yesterday that nuke-armed Pakistan is only a month away from bankruptcy. Now tiny Iceland looks like it might get there first.

Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

... A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

Iceland right now is apparently in a state of shock and gives a snapshot of what a depression with the Great in it will look like everywhere - "cafes were half-empty, real estate agents sat idle, and retailers reported few sales" says the AP.

And, just as Pakistan has begged the West for $100 billion to stave off economic collapse, Iceland has had to go cap-in-hand to a bigger power too. Only they've chosen the Russians - asking for a 5.4 billion loan to shore up the nation's finances.

That must be giving NATO planners conniptions. Loans like that, in the present climate, aren't going to come without strings and Iceland is the keystone in NATO's maritime defenses in the North West Atlantic, designed to keep Russian warships and subs containable in their home waters should the need arise.

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