Think the financial crisis is bad here? Things could be worse: we could be in Iceland.

Iceland’s Prime Minister has given a televised speech warning that the country faces possible “national bankruptcy” due to the global financial crisis.

Geir Haarde made the comments last night following a day of panic on stock markets across the world.

Iceland is particular exposed to the financial crisis as its banking sector totally dwarves the rest of the economy.

The situation has led to soaring inflation and a massive fall in the value of the Icelandic krona.

The Government has introduced emergency legislation giving it sweeping new powers over the financial sector in an effort to stave off a total economic collapse.

Glimp of time, originally uploaded by icerock.