“Kaupthing was the last, best hope of the Icelandic banking system, and it was killed there and then,” Andres Magnusson, an editorial writer for Icelandic Financial News, said in an interview. “This really was the last straw. A lot of Icelanders are asking, ‘Excuse me: who’s the terrorist here?’ ”

The bank’s collapse had repercussions beyond Iceland and Britain. More than 8,000 depositors, individuals and businesses, hold Kaupthing Singer & Friedlander accounts worth about $1.34 billion on the Isle of Man, money they cannot get their hands on now  and may never.

Iceland is in line to receive a $2 billion loan from the International Monetary Fund and is talking to other Scandinavian countries. It is not entirely friendless: it was recently offered a loan of about $52 million from the tiny Faroe Islands, for which it is very grateful, Mr. Gunnlaugsson said.

The Icelandic government has pledged to make good on domestic bank accounts. But it is still fighting with Britain over how much it is obliged to pay  and how much it can afford to pay  to compensate customers with accounts in Icesave, Landsbanki’s British branch.

Under European regulations, Iceland is obliged to pay 20,000 euros (about $25,000) to each individual account holder in Icesave. But the total, Ms. Gisladottir, the foreign minister, said, would amount to about 600 billion Icelandic kronur  only about $5 billion at today’s collapsed exchange rate but fully 60 percent of Iceland’s gross domestic product.

“The compensation that we would give would be twice as much per head as the reparations Germany faced in the Treaty of Versailles after the First World War,” she said. “That is something we cannot afford.”

The British government has guaranteed that individual British account holders will be compensated fully, which is why it is seeking to wrest as much money as possible from Iceland. But no such guarantees have been made to the British companies, local governments, charities and universities  including Oxford and Cambridge  that had Icesave accounts. That figure alone is well over a billion dollars.