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Yahoo! My Yahoo! Mail Yahoo! Search Search: Sign InNew User? Sign Up News Home - Help Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Asia Pacific World Search Search: Icelanders' belts tighten but solidarity soars AFP - 2 hours 4 minutes ago REYKJAVIK (AFP) - - In the windy capital of Reykjavik where two-thirds of Icelanders live, there's not a homeless person in sight and no telltale signs that the economy was brought to its knees six months ago. ADVERTISEMENT But away from the capital's trendy stores and restaurants, Icelanders have tightened their belts and are showing more solidarity with those now in need. Iceland was rolling in money before the North Atlantic nation's three major banks collapsed and plunged the country close to bankruptcy -- a crisis that led to a snap general election to be held this Saturday. Now many people feel like "they've taken a step back, like they've returned to the 1970s or 1980s," Gunnar Haraldsson, the head of Iceland's Institute of Economic Studies, told AFP. "For people who still have a job nothing has really changed, except they don't travel that much. They go abroad less and they spend less money in their daily life," says 35-year-old customs officer Urnur Kristjansdottir. This mother of three children under the age of 10 is not worried about the future and suggests that the crisis has made Icelanders more "reasonable" again. The country became one of the world's richest with one of the highest living standards as its banks and financial tycoons expanded abroad to conquer foreign markets as boldly and aggressively as their Viking ancestors once did. In 2007, Iceland's economy grew by 5.5 percent, making it the envy of Europe as its gross domestic product (GDP) per capita soared to nearly 65,300 dollars (50,300 euros). But in 2008, growth was down to a meagre 0.3 percent and per capita GDP fell by 20 percent to 52,000 dollars, according to official statistics. The Icelandic currency was in freefall after the crisis erupted in October. The situation is expected to worsen dramatically this year, with an economic contraction of 10 percent and unemployment set to hit 10 percent by the end of 2009. This would put it closer in line with jobless rates in the European Union -- Iceland is not a member -- but comes as a shock here where unemployment tripled in the first quarter from 2.3 to 7.1 percent, according to Statistics Iceland. Valur Gunnarsson, a taxi driver in his 50s, says private sector employees no longer take taxis the way they used to, opting instead for public transport buses to save money. "There are signs that the crisis is there," said economist Haraldsson. "With the unemployment rate, some households now have to get help from charities," he said. "But they are a minority." At the same time prices for consumer goods, which for the most part are imported, have soared. The inflation rate swelled to 15.2 percent in March -- a heavy blow for all Icelanders but especially the growing number without jobs. Household consumption has dropped sharply since last autumn and shows no sign of picking up, with the finance ministry forecasting a fall of 24.1 percent this year. Haraldsson said the main problem for households was paying back loans taken in currencies other than the Icelandic krona, which saw its value fall by 44 percent last year. "For households and companies that have loans in foreign currencies, it's a catastrophe," he said, noting that around seven percent of mortgages were in yen, dollars or euros. In the suburbs outside the capital, a number of newly-built homes stand empty. But Icelanders are taking it in stride, and helping each other weather the storm. Parents invite their grown children round for dinner, grandparents help support their grandchildren, and some young families have left Reykjavik to resettle back in native towns in the countryside, some even moving in with their parents. Others who worked abroad like 32-year-old Hinrik Hansen have returned home. A former salesman for a fish and meat import business in Germany, Hansen moved back to Iceland four months ago. "I decided to open a bar in a suburb of Reykjavik. It's very challenging but I couldn't leave my family in trouble here and stay in Germany," he said. Though times are tough, "we should stand up and stay united together," he said. "We have experienced crises before, perhaps not at this level but we've always gotten through them." For economist Haraldsson, not all is negative. "Our society is maybe a better one today than it was in 2007. We have no money but people are displaying greater solidarity," he said. Email Story IM Story Printable View Blog This Recommend this article 0 users recommend Sign in to recommend this article » Most Recommended Stories » Related Articles: Entertainment & Lifestyle Mobile service Flo TV nabs Amanda Congdon seriesReuters - 2 hours 24 minutes ago Study details positive economic impact of showbizReuters - Wednesday, April 22 Tribeca Film Fest bows amid turbulent timesAP - Wednesday, April 22 Cowell says he'd jump ship if "Idol" sinksReuters - Wednesday, April 22 Warner Bros. No. 1 at U.S. box office for year so farReuters - Wednesday, April 22 Most Popular – Entertainment Viewed Robust profits mask problems in bank sector Warming pushes birds to migrate farther 'Silent' heart attacks go unnoticed: study Physicist Stephen Hawking 'very ill': university Police nab Norwegian pair during high-speed sex View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Copyright © 2009 Yahoo! 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