Iceland just elected the parties which plunged them into crisis only five years ago. Is it casino capitalism all over again, or just a slap in the face of the EU?

In terms of redemptive electoral stories, the return of the Independence Party in Iceland is quite significant, albeit that they will come back to government with only a few percentage points more votes than they polled at their nadir in the depths of the Icelandic crisis in 2009.

However the biggest winner was Sigmundur Gunnlaugsson, the leader of the Progressive Party, who propelled his party to hold 19 seats (same as the Independence Party) with 24.4 versus 26.7 per cent of the vote respectively. The parliament (Althing) has 63 seats, so the two leading parties have a comfortable working majority against a dissipated opposition which includes two new parties.

True, the political class is not exactly enjoying a ringing endorsement. True, 83.3 per cent voted, but that turnout was the lowest since independence from Denmark in 1944. Politicians are only trusted by 15 per cent of the population. Unsurprisingly, only bankers fare worse.

At the inflection point of the crisis, Iceland introduced capital controls and stinging austerity, but it also had a tool up its sleeve which struggling Mediterranean nations cannot take advantage of. Whereas they are imprisoned in the euro, the Icelanders let their krone collapse.

Icelandic companies diligently sought to export their cheaper goods. Meanwhile, hordes of non-Viking raiders arrived and exported secondhand cars and other goods to Scandinavia and Eastern Europe, adding some liquidity to the Icelandic economy at its bottom. Compare that with Spain or Italy, where the euro has inflated the price of everything to levels which render these countries less competitive. An acute failure in a competitive globalized world.

The Progressive Party in particular gained in the election thanks to Gunnlaugsson’s resolute approach to the crisis. While declining socialist UK Prime Minister Gordon Brown railed impotently, demanding recompense for British depositors in the collapsed Icesave Bank, Gunnlaugsson even in opposition was a firm opponent of any repayment. Now the new government is likely to enforce severe losses and write-downs on creditors to the Icelandic banks.

Devaluation and enforced losses on creditors won’t make Iceland much more popular within the EU, but then again the EU’s rather arrogant attitude towards Iceland’s membership of the zone helped force a dramatic turnaround in sentiment away from the pro-European integration government, which was roundly defeated at the weekend. Part of the reason for that defeat lay in Brussels’ demonstrating the worst of monarchical/imperial arrogance in expecting hard-pressed Icelanders to be utterly supplicant to the daft dogmas of myopic Europhilia.

• A Permanent Economic Emergency