The writer, the witch, and the board head.

This is the second part of a two-part series on the author's trip to Iceland after its economy suffered the effects of the global credit crisis. You can read the first part here.

Early Sunday afternoon, I have coffee with Vigdís Grímsdóttir, a writer living in a quiet neighborhood just south of Reykjavík's main drag. Vigdís is the author of 11 novels, three collections of short stories, two volumes of poetry, a biography, and one children's book. The first thing she talks about after seizing my coat ("Take off your clothes. Not all of them") is how the couple downstairs lost their jobs and are moving out. As she speaks, her mind seems to commute between two moods—one distant and portentous, the other brisk, playful, and slightly frazzled. At one point, she stops midsentence to gape in horror at my coffee. "It must be cold!" she says in a half-whisper. "Is it bad?"

I've come to see her in the hope of finding out how one of Iceland's most prized assets—its national literature—is weathering the crash. Normally, early winter is the season of bounty, or what passes for bounty in Iceland, among local publishers. Almost every book is released in the two-month run-up to the holidays (called the jólabókaflóðið, or "Christmas book flood"), the idea being that hyperliterate, winter-bound Icelanders are, essentially, the world's most concentrated gift-book market. With production costs up and wallets slim this season, though, the plan risks falling flat. Roadblocks loom on the creative end as well: The government has paid tens of Icelandic authors' salaries every year, effectively helping to keep the country's literary output afloat. That sponsorship is almost certain to be scaled back, given changed regulations and the economic pinch.

At fiftysomething, Vigdís wears black the way some people wear red—a heavy shawl thrown dramatically around her shoulders, a whoosh of ebony hair—and she moves with the aloof intensity of an offstage actor. The literary world has come at the collapse with new fervor, she says, with previously standoffish authors stepping into the fray. "Now they're writing articles in the newspaper, much more than before," she tells me. "So many writers are coming from their shells." Vigdís has noticed a difference in public attention, too: Beginning last winter, when she was doing publicity for her latest book (a biography of an Icelandic everywoman), each reading she gave was packed. To her, this spelled impending crisis. "I could feel it in the air," she says. "There was something changing. People wanted to hear about—themselves, maybe." She thinks it showed readers' distrust of stories about highflying success and affluence.

So far, this year's jólabókaflóðið has not been hindered. Jóhann Páll Valdimarsson, publisher at the Icelandic house Forlagið, which is responsible for about two-thirds of the book market, says in an e-mail that sales this fall are strong and "probably up quite a bit from last year." He has deliberately kept book prices low, despite an increase in production costs, in anticipation of a larger-than-usual readership this winter—Icelanders, he thinks, seek solace on the page. Editorial cutbacks are inevitable, though. They will show up next year. "What we decided the day the first bank collapsed," he says, "was to postpone many titles we had in the pipeline for next year and 2010."