Iceland has announced plans to unwind capital controls imposed after the tiny island nation's banking system collapsed seven years ago.

The government announced Monday that it is introducing legislation to unfreeze 1,200 billion kronur ($9 billion) in assets under restrictions since the 2008 financial crisis.

Under the measures, assets recovered from the failed banks will able to leave the country, subject to a 39-percent "stability tax."

Iceland, population 330,000, went from economic powerhouse to financial disaster almost overnight when its debt-burdened commercial banks collapsed within a week in 2008.

The economy has since recovered, and Iceland wants to ease the controls without causing money to flood out of the country.

Prime Minister Sigmundur David Gunnlaugsson says the government is taking "unprecedented measures ... to address unprecedented circumstances."