Now observers say widespread layoffs are expected, The New York Times reported Saturday.

The newspaper reported inflation in Iceland is at 16 percent and rising. The krona, a year ago, was at 65 to the dollar; now it's 130.

"No country has ever crashed as quickly and as badly in peacetime," said Jon Danielsson, an economist with the London School of Economics.

Until last spring, Iceland's economy had the fourth-highest gross domestic product per-capita in the world. Unemployment rates were between zero and 1 percent, but forecasts for next spring are as high as 10 percent.