This is absolutely the correct interpretation, though this article is appallingly badly written compared to the Bloomberg Businessweek original (http://www.busi

This is absolutely the correct interpretation, though this article is appallingly badly written compared to the Bloomberg Businessweek original (http://www.businessweek.com/news/2012-08-12/imf-says-bailouts-iceland-style-hold-lessons-for-crisis-nations http://www.businessweek.com/news/2012-08-12/imf-says-bailout...). The reason why the IMF is critical to this is because of a (in)famous paper they released in September 2010 essentially formalising a past decade of IMF policy outlook called, "Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely" - http://www.imf.org/external/pubs/ft/spn/2010/spn1012.pdf http://www.imf.org/external/pubs/ft/spn/2010/spn1012.pdf Iceland is a perfect highly modern example of why sovereign default is such an effective recovery tool. Default has been historically proven as effective for thousands of years and often the ONLY recourse for states with unsustainable or structural debt overhangs (regardless of where or how that debt came from) that would cripple their future prospects or cause an immense medium term opportunity cost. The key though is that default often forces institutions, policies and their regulatory frameworks to re-align with sustainable long term goals of the state as well as leave a lasting cultural mark on their people to never permit such mistakes again. Clearly, this has been the case for Iceland while amazingly retaining their welfare system. What I find particulary impressive was their committment to apply capital controls despite some enormous, vociferously protected external claims, particularly those from much larger nations such as the UK.