When Iceland’s banks ran amok in 2008 and then crashed, the government let them fail. Since the banks’ loans amounted to 10 times the GDP, they had little choice. So the banks creditors and bondholders took the hit. They also threw some bank officers and the Prime Minister in jail for fraud. Radical. The conventional wisdom was that Iceland was doomed to be an economic basket case forever. Turns out not to be the case. Iceland bit the bullet, took their lumps then and there and is nicely on the road to recovery while the EU and the US continue to struggle with the ongoing financial crises.
See Iceland Did It Right … And Everyone Else Is Doing It Wrong for the changing consensus.