Iceland is bankrupt. The króna is worthless, the banks are disasters, investors in England and Holland are livid, and people are bracing for difficult times. Nobody knows where they’re going from here, but this economic implosion also threatens Iceland’s cherished independence, a notable part of its medieval past.

You can still see where they did it, where Gizurr Thorvaldsson and his henchmen ambushed Snorri Sturluson. Priest, politician, lawyer, and poet, Snorri loved to lounge al fresco in his steamy pool at Reykholt. There, on his own property, on September 23, 1241, his enemies stabbed him to death, probably in his basement. He kind of had it coming: He had used his relatives as pawns in a series of grand political games that made him the wealthiest and most powerful man in Iceland, but also the greediest and most arrogant—until his former son-in-law sought all of those distinctions for himself.

At tiny Reykholt, modern Icelanders have honored Snorri with a statue. As the author of the Prose Edda, Snorri collected fading wisdom that otherwise would have been lost; Heimskringla, his history of the Norse kings, earned him a reputation as the Nordic Thucydides; and he may be the unnamed author of the brutal and humorous Egil’s Saga. All of that is lovely, but in an age that regards writers as rarely consequential, we ought to remember how belletrist Snorri Sturluson, through wild rapacity, helped bring his country to ruin.

In the 13th century, Icelanders saw themselves as a people in moral freefall. Men of all stations openly took mistresses, lawyers exploited the system, and family and friends broke faith with each other for money, all of which made the ninth through eleventh centuries—the earlier era described in the sagas—seem like a golden age. Iceland’s educated men wrote down those sagas; all the while, the kings of Norway looked for a way to take over.

In Heimskringla, Snorri describes the debate that arises when King Olaf of Norway asks the Icelanders to cede him a barren, outlying island. Some Icelanders are fine with the arrangement, but one man, Einar, plays the contrarian:

I am chary of my words about this business, because no one has asked me. But if you wish to have my opinion, then I would say that it were best for the people of our country not to subject themselves here to pay tribute to King Olaf, nor to all those taxes such as he has imposed on Norwegians. And we would impose that bondage not only on ourselves but both on ourselves and our sons and all our people who live in this land; and that bondage this land would never be free or rid of. And though this king be a good one, as I believe he is, yet it is likely to be the case, as always hitherto, that when there is a change in the succession there will be some kings who are good and some who are bad. But if our countrymen would preserve their freedom, such as they have had ever since they settled here, then it would be best not to let the king get any hold here, whether it be a piece of land or our promises to pay fixed taxes, which might be interpreted as due from subjects.

Snorri wrote that episode; he put those words in Einar’s mouth. But Snorri also sought the patronage of the Norwegian king, which made his countrymen suspicious of him; on the other hand, he smoothed over tensions with Norwegian merchants and averted a Norwegian invasion. But Snorri lived for Snorri, and when he visited Norway in 1237 with a seditious friend and then sailed for home in 1239 without the king’s permission, he was branded a traitor. After Snorri’s killing, the Norwegian king claimed his vast landholdings as compensation. Through recklessness and greed, Snorri had, in death, compromised his country’s independence by giving the Norwegian throne a foothold, thus ending Iceland’s four-century run as a monarchy-free, oligarchic commonwealth. Two decades later, most Icelanders swore oaths of loyalty to the king; within two years, Iceland belonged to Norway.

Independence has long been a hallmark of Icelandic exceptionalism, mostly because it’s been so elusive. After centuries of rule by Norway and Denmark, Iceland achieved independence in 1944 as Denmark was otherwise occupied. The establishment of a NATO base in 1951, so soon after independence, prompted noticeable grief in Iceland, but the latter half of the 20th century was a time of unprecedented wealth and progress—all of which came crashing down last week.

The likely solutions are troubling. There’s talk of an IMF bailout, the króna is being declared “history,” and Iceland may need to join the EU and adopt the euro as its currency. The Russians have offered a massive loan, which troubles old Norway, while strange rumors are circulating that Iceland will let Russia use the now-vacant NATO base. Ominously, the prime minister warned that in times of trouble, “one has to look for new friends.”

History doesn’t repeat itself; that’s a chestnut the Icelanders shouldn’t abide. Suffering now from the schemes of modern Snorris, they also can’t afford to pause and be cautious like Einar. Those of us who are fond of Iceland will hope for a leader who’s made for these times, someone who knows this crisis has no precedent but whose response will show an appreciation for that medieval love of independence—and the value of those first 400 years.

There’s medievalism everywhere, even in the midst of an Icelandic banking crisis.

Iceland’s three largest banks have amassed a combined debt that’s nine times more than the country’s $19 billion GDP. On Friday, the Icelandic government intervened and bailed out the third-largest bank, the curiously named Glitnir.

Glitnir hasn’t always been Glitnir. Founded in 1904 as Íslandsbanki, the bank was renamed in 2006 “to reflect our wider Nordic tradition and to distinguish a new era of growth and expansion,” according to the Glitnir Web site. To the Icelanders’ Norse forefathers, Glitnir was one of several splendid places high above. In the Prose Edda of Snorri Sturluson, Gangleri is impressed by how much knowledge an Æsir king can offer about these places: Mikil tíðindi kannþú at segja af himnum, he tells him. You can see the relation to English there if you squint: “Much tidings can you say of the heavens.”

Here’s what the Prose Edda says about Glitnir:

Forseti is the name of the son of Baldr and Nanna Nep’s daughter. He has a hall in heaven called Glitnir, and whoever comes to him with difficult legal disputes, they all leave with their differences settled. It is the best place of judgment among gods and men. Thus it says here:

There is a hall called Glitnir, it is held up by golden pillars and likewise roofed with silver. There Forseti dwells most days and settles all disputes.

“Forseti,” formerly the name of a Norse god of justice and peace, is now the Icelandic word for “president,” a choice that suggests optimism among the founders of the modern Icelandic republic. No journalist has yet alluded to Ragnarok in stories about the economic meltdown, but that’s understandable, because a failed bank named after a gleaming hall of divine judgment harks back to a concept far more timeless than anything medieval: good, old-fashioned irony.

The Icelanders are a mild people, but they often let us see their Viking roots. In 1973, when Eldfell on the island of Heimaey erupted, they didn’t squeal and sail away; they held off the advancing lava with fire hoses. Last week, Jon Eiriksson, who ferries tourists to the tiny northern island of Drangey, demonstrated his own Icelandic fortitude:

“I thought I’d do some fish angling for dinner while the people were on the island. I turned the boat around as usual and was going to step on board when I slipped, fell onto the pier and from there into the ocean.”

“The boat was loose and drifted away from the pier. I thought it was rather silly to be there like a fool with people on the island and no boat, so I decided to swim after it,” Eiríksson said. He caught the boat after 20 meters but was unable to climb up the stairs.

The “Earl of Drangey” then fell into the ocean again so he decided to swim ashore and then his boat followed. “The boat just offered its right bow to me where I was sitting on the cliff so I could walk onboard like a gentleman,” he explained.

“I thought it was kind of it, not every Skagfjordian stallion would have done the same [Skagafjördur is famous for its horses]. I then sailed the boat back to the pier and had put on my flotation suit before the people came back onboard, like nothing had happened.”

As Iceland Review points out, there’s local precedent for Jon’s hardy swim. Grettir Asmundarson, the greatest outlaw of the Icelandic sagas, hid out on Drangey with his brother and a moping slave who failed to keep the fire burning. Lacking a boat, Grettir decided to swim to the mainland for fire:

Grettir prepared for his swim by putting on a homespun cowl and breeches, and having his fingers wrapped up together. The weather was good, and he left the island late in the day. Illugi throught his voyage boded ill.

Grettir swam into the fjord with the current behind him, and it was completely calm. He swam vigorously and reached Reykjanes when the sun had set, then went up to the farm at Reykir and bathed in the hot pool there, because he was quite cold.

The distance between Drangey and Reykjanes? Nearly four miles.

If you’re an Icelandophile, keep an eye on the Iceland Review Web site for other stories with saga angles, such as updates on the excavation at Mosfell, the farm where the notorious Egil Skallagrimsson spent his later years. Archaeologists haven’t yet uncovered Egil’s famous buried treasure—or, if they have, they’re not saying. In the meantime, you can order Egil’s soft drinks through the mail. I’m partial to the pineapple mix—because nothing says “dangerous Viking outlaw” like the syrup-sweet snap of tropical fruit.

Preserving old data can take many forms. Árni Magnússon spent most of his life collecting Icelandic manuscripts, famously finding scraps of sagas stuffed in the rafters of cottages; he saved every shred he could find. When he died in Denmark in 1730, the manuscripts stayed there, too. After World War II, Denmark agreed to return them to the newly independent Iceland, a process that began in 1971 and continued for 26 years. According to this PDF, the Royal Library in Copenhagen returned 141 manuscripts, while the Danish institute named for Árni Magnússon returned a staggering 1,666 manuscripts and more than 7,000 legal documents.

Icelanders were delighted, as The Economist reported in 1997:

Middle-aged Icelanders still remember the excitement of standing at Reykjavik harbour in 1971 when a Danish naval ship brought back the first manuscripts. “It was a singular show of friendship on the part of the Danes,” says Elias Snaeland Jonsson, a writer and a journalist, not least because the Danes were under no legal obligation to return the manuscripts.

Today, if you visit Reykjavik, go to the Árni Magnússon Institute and marvel at these tough old books—especially the Codex Regius of the Poetic Edda, one of the first manuscripts to be returned to Iceland. Consisting of the oldest surviving copies of the eddas, the poems about early Germanic gods and heroes, the Konungsbók Eddukvæða—as it’s known in Icelandic—is uniquely important: wthout it, our already scant knowledge of the myths and legends of early Germanic people would be cut at least in half.

For centuries, the Danes appointed themselves the custodians of Icelandic history. The Icelanders now control their own past, but they may be the keepers of everyone’s futures. In its May 22 report on the world’s massive server farms, The Economist noted that data centers need cheap power, water for cooling, and the security of physical remoteness. Enter the heirs of the Vikings:

Iceland has begun to market itself as a prime location for data centres, again for the cool climate, but also because of its abundant geothermal energy. Hitachi Data Systems and Data Islandia, a local company, are planning to build a huge data-storage facility (pictured at top of article). It will be underground, for security and to protect the natural landscape.

Technology will make this future possible, but the Icelandic character makes it wonderfully fitting. In his 1955 Nobel acceptance speech, Icelandic novelist Halldór Laxness recalled the saga-writers who made it their work to preserve their own past:

They live in their immortal creations and are as much a part of Iceland as her landscape. For century upon dark century those nameless men and women sat in their mud huts writing books without so much as asking themselves what their wages would be, what prize or recognition would be theirs. There was no fire in their miserable dwellings at which to warm their stiff fingers as they sat up late at night over their stories.

In years to come, if your travels take you to rural Iceland, the hillsides you see may be wholly man-made. Preserved in those hills will be all you’re forgetting: your music, your writing, and even your photos of Iceland itself—misplaced, and in fragments, and surely abandoned, but waiting for someone, a new Árni Magnússon, to shoo away sheep and remember.

(image: The Economist)