An interesting point is there is a difference between damage to paper valuations and damage to the real economy. In Iceland's case there may have been a big paper impact where before the crash your currency was worth so many dollars and after many fewer but in the real world people had the same houses and cars and kept their jobs and so on. In Ireland on the other hand people lost their jobs and houses, topped themselves, emigrated and so on. At the end of the day real wealth and human well being are what counts and the financial system is only a tool to achieve that.
Because the value of most of the things you needed to buy (mostly other people's labors in food service, etc.) was cut in half too. Of course this doesn't count imports (which became twice as expensive in real terms) but that's a hit that can actually be survived.
The value of their paychecks probably remained about constant for local goods such as food and rent. They probably fell a lot in terms of things like flying to London to go shopping and that is a real change but probably one they can live.
It's really the value of their paychecks relative to imports. (In a small country, you do have to export a lot relative to GDP, but you can wind up exporting cheaper too)
