The funny thing is that people actually believe that this is a debunking of anything Krugman has actually written. But let's take a closer look at the actual "data" relied on. Let's take a look at the the Iceland example, since it appears first:
In 2007, government spending in Iceland was 42.3% of GDP. It increased substantially in 2008 (to 57.7%) in response to the crisis, which high spending continued above 50% in 2009 (51%) and 2010 (51.5%). So, while it's true that Iceland didn't throw taxpayer money at banks, it isn't true that Iceland "slashed" spending. Instead, it increased it. Substantially. And as the economy recovered in 2011, it reduced spending, albeint not to pre-recession levels (47.3 in 2011). It is appropriately reducing spending as a percentage of GDP (both because GDP is increasing and becuase less spending is necessary further out from the crisis).
Moving on:
In 2007, the Icelandic government ran a 5.4% surplus. When the shit hit the fan, it increased spending dramatically to a 13.5% deficit (not sure where the 12.9 figure comes from. My numbers are from Eurostat), which increased spending continued in 2009 (10% deficit), 2010 (10.1% deficit) and tapered off in 2011 as the economy recovered (5.4% deficit). The idea that Iceland is an austerity success story is just plain horseshit.
Continuing:
Quite right, it's non-existent. Not true. A falsehood.
