Professor Hannes Gissurarson, writing in the Wall Street Journal, said: "Iceland isn’t melting."

He pointed to an improving current account deficit which dropped to 16 per cent of GDP in 2007 from 25 per cent the year before.

Professor Gissurarson, who is professor of political theory at the University of Iceland, said that Iceland has virtually no public debt and has enjoyed “unparalleled political stability” since the pro-business Independence Party took office in 1991.

He said that this new capital, which has seen a surge in Icelandic investments overseas - particularly in British and Nordic retail and fish processing - has been part-funded by five billion dollars worth of fishing quotas and six billion dollars of newly-privatised public assets in Iceland.

Iceland has long privatised and monetised its public assets, even including its fish stocks. Catch quotas are tradable among fishing companies, creating a capital resource worth a total of about $5 billion that has been used as collateral for investments.

That was why Icelandic investors “have been able to play a far more important role in international finance markets than the small size of the economy might suggest".

He also highlighted that Iceland has per capita one of the strongest state pension systems in the world, with assets of around $24 billion at the end of 2006 - $7 billion more than the country’s total annual GDP.

Its two main exports, seafood and aluminium, also currently command record prices.

Professor Gissurarson concluded that there “is no mystery” to the recent appearance of Icelandic investors abroad, pointing to the rapid transformation of what was in essence a poor country before 1991, to a rich one with a privatised economy and “liquid capital” that can be used as collateral.

Finnur Oddsson, managing director of the Icelandic Chamber of Commerce supported his views, saying: “The global turmoil is certainly hurting the financial sector, but the danger of things toppling over here is greatly exaggerated.”

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