11/16/2010 11:02 am ET | Updated May 25, 2011

Reykjavik: Still Scandinavia's Coolest Hot Spot

It wasn't too long ago when Iceland was something of the prom queen of nations, the envy of countless other countries. She seemed to have it all -- stunning beauty (Geysers! Hot springs!), a rich sense of culture (mandatory music classes for every child, sagas), a strong focus on sustainability and a historically excellent education system. And what's more: she can party. Reykjavik's bars and clubs run the gamut from the raw and raucous to the subdued to the surreal, and they stay open until dawn -- when the sun is rising, that is. In 2008, Iceland was ranked number one by the United Nations in its Human Development Index, meaning it was the most desirable place to live. That, of course, came at a price: it was also one of the more expensive nations to live in.

The Icelandic stock market was an embarrassment of riches, swelling to nine times its value from 2003 to 2007. It was still a nation of fishermen, but an investment banking industry had developed alongside that. Then, in October 2008, the Icelandic banking system became what would be only the first on the planet to fall, sending this nation of 320,000 into a financial tailspin. In short: mortgages and car loans were tied to other nations' currencies, and with the Icelandic krona plunging in value, they were impossibly to repay. The rose up against the government for lack of oversight. Then just a few months later, Iceland made international headlines again when an unpronounceable volcano erupted, spewing ash into the air and disrupting global travel. Thing is, barely anyone on the ground on the island was affected.

Which is precisely why this makes now an ideal time to pay a visit. The krona is more affordable by American standards than it has been in years past, and while full recovery is still a ways off, the country is in the midst of a post-crash renaissance. Since the banks fell, some international businesses, like McDonald's, closed up shop and vamoosed, leaving opportunities for new businesses to open.

Plenty of Americans have already taken advantage (it's also got the quick flight-time in its favor -- less than five hours from New York or Boston). A spokesperson for Icelandair said that the volcano activity actually piqued curiosity in Iceland as a destination. People have been going to see the eruption and its somewhat magical effects on the immediate atmosphere. Over the summer, the airline increased the capacity of its flights out of New York and they recently announced that in May 2011, they'll open a new gateway out of Washington D.C.

The flights during a recent trip I took for Iceland Airwaves, a blowout music festival that attracts thousands of musicians and the fans that love them, were most definitely booked. About 5,000 guests flock to the very walkable capital for five days of music. You can find DJs galore spinning propulsive, transfixing beats late into the night, power pop, idiosyncratic folk from everywhere, Scandinavians rapping in English, raw metal, electro-clash, shoe-gaze, rockabilly, grand ensembles playing lushly orchestrated pop -- you name it. Locals told me you could find this every weekend, you just have to look harder. Something about the isolation and darkness of the place breeds creativity.

I spent a few days in the capital and checked in with business owners and other people around the city to get the skinny on what day-to-day life is like in this once euphoric capital. I found that with its Viking-esque fortitude and instinct for saga-like plots (not to mention a history of enduring tough weather conditions in the past), there's every reason to believe the society is well on the mend.
(Photos by Liza Weisstuch)

Reykjavik: Iceland's Hot Destination