“We’ve basically gone back to 2003 in terms of the level of standard of living,” he said. The worst has been felt by younger people who borrowed at the height of the bubble and are now having to reduce their debt, he said. “But they’ll come through this,” he added.

Iceland’s experience, he said, offered a lesson for the euro zone as it grappled with its own crisis: “This is the proper process. If you go through a bubble economy and you need to correct it, the answer is not to convert private debt into public debt. Rather it is to restructure the debt to the level of the assets.”

That the economy was not yet out of the woods was made clear by data showing that in the third quarter, G.D.P. shrank by 2.1 percent, on an annualized basis, from the year-earlier period. For the first nine months of the year, the decline was 5.5 percent. The statistics agency also warned that the extreme turbulence and structural change Iceland has undergone meant the data should be “interpreted with care.”

Julie Kozack, an official of the International Monetary Fund, said last month that the Icelandic economy would most likely improve further in 2011, but that delays to investment projects, plus the need for household and corporate debt restructuring, would continue to weigh on growth. The fund and some member governments agreed in November 2008 to provide $2.1 billion to help rebuild Iceland’s finances.

The three biggest Icelandic banks, which had expanded aggressively during the credit bubble, all failed and were nationalized in October 2008. Cleaning up the mess left by one of those, the Icesave unit of Landsbanki, has soured relations with Britain and the Netherlands and delayed international aid.