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COUNTRY PROFILES


PROFILE

Country Profile

Area: 103,000 sq km (39,769 sq miles)
Population: 323,000 (UN 2009)
Capital City: Reykjavik (Population 120,165 – Oct 2008)
People: Icelanders
Languages: Icelandic
Religion(s): Christianity - Evangelical Lutheran, Protestant, Roman Catholic
Currency: Icelandic Krona
Major political parties: Social Democratic Alliance (SDA) led by PM Jóhanna Sigurðardóttir; Left-Green Movement (LGM) led by Minister of Economic Affairs and Minister of Fisheries and Agriculture Steingrímur Sigfússon; Independence Party (conservatives) led by Bjarni Benediktsson; Progressive Party (centrist liberals) led by Sigmundur D Gunnlaugsson
Political System: Constitutional Republic
Government: Centre Left coalition of the Social Democratic Alliance and the Left-Green Movement – since May 2009 (last election 25 April 2009)
National Day: 17 June (Inauguration of the Republic of Iceland 1944 – union with Denmark terminated 16 June 1944)
National Anthem: Ó, Guð vors lands ('O, God of Our Land')
Head of State: President Olafur Ragnar Grimsson (since 1996)
Prime Minister: Jóhanna Sigurðardóttir (SDA) (Since February 2009)
Foreign Minister: Össur Skarphéðinsson (SDA) (since February 2009)
Membership of many international groupings/organisations including: Arctic Council, Barents Euro-Arctic Council, Council for Baltic Sea States, Council of Europe, European Bank for Reconstruction and Development, European Economic Area, European Free Trade Association, International Bank for Reconstruction and Development, International Civil Aviation Authority, International Criminal Court, International Monetary Fund, International Maritime Organisation, Interpol, Intelsat, International Whaling Commission, NATO, OSCE, OSPAR, Convention for the Protection of the Marine Environment of the North East Atlantic, Nordic Council of Ministers (Chair in 2009), Schengen, UN, Western European Union (associate), World Trade Organisation.

A list of the principal International Organizations of which Iceland is a member is available on the Icelandic MFA‘s homepage (http://www.utanrikisraduneyti.is/stofnanir-og-nefndir/althjodastofnanir/nr/603) .

Interesting Facts:
-- The Althingi (Parliament), the world's oldest functioning legislative assembly, was established in the year 930 AD.

-- 90 per cent of the population have their heating and power supplied from hydro-electric and geothermal sources.

-- 79 per cent of Iceland's land area consists of glaciers, lakes and lava fields. It is one of the world's most volcanically active regions with more than 200 volcanoes. Over the past 500 years Iceland has thrown up a third of the earth's total lava flow.
-- • Famous Icelanders: Leif Eriksson (Explorer, considered to be 1st European to discover north America), Vigdis Finnbogadottir (world's first elected female president in 1980), Jóhanna Sigurðardóttir (world’s first openly gay Head of Government), Halldor Laxness (Nobel Literature Prize winner in 1955 – The Atom Station, Iceland's Bell, Independent People, The Fish can Sing), Björk (singer/songwriter), Sigur Ros (rock group), Emiliana Torrini (singer/songwriter), Magnus and Sally Magnusson (father and daughter TVpresenters and writers), Baltasar Kormákur (actor and director – Contraband) Arnaldur Indridason (crime writer – Jar City), Heidar Helguson (footballer – QPR, formerly Watford and Fulham) and Magnus Scheving (“Lazy Town”) .
-- Icelandic food specialities: Cured skate (pungently laden with ammonia), Dried fish (usually eaten with butter), Rams' testicles (pickled in whey), Svid (charred sheep's head), Shark (putrefied), Slátur (haggis-like concoctions made from sheep's blood and intestines).

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ECONOMY

For many years, Iceland enjoyed a standard of living that was among the highest in the world. Its prosperity initially rested on the fishing industry, but with the gradual contraction of this sector and the growth of the population, the Icelandic economy developed into new areas.

During the 1990s, and for most of the past decade, Iceland restructured its economy mainly by deregulation and liberalisation. By the beginning of the 21st century, Iceland had come to epitomise the global credit boom. Its banks expanded dramatically overseas and foreign money poured into the country, fuelling exceptional growth. Before the global credit crunch took hold, Icelandic banks had total assets worth about nine times the country's GDP, with debts to match, and Icelandic businesses also made major investments abroad.

The global financial crisis of 2008 exposed the Icelandic economy's dependence on the banking sector, leaving it particularly vulnerable to collapse. The high leverage of the Icelandic banks and the lack of adequate financial sector supervision coupled with the lenders being unable to access last resort facilities in the required foreign currencies. This was due to the weakness of the Central Bank of Iceland. Amid the global financial turmoil, Iceland’s banking sector collapsed in 2008, pushing the economy into a monetary and financial crisis and leading to a deep recession.

In response to the crisis and as a consequence of the public takeover of the failed banks, the government balance turned into a high deficit, equivalent to 13.5% of GDP in 2008 and 9.1% in 2009, following years of budget surpluses. The gross public debt reached around 106% of GDP at the end of 2009. In co-operation with the International Monetary Fund, the Icelandic government is working on consolidating the state finances and ensuing policies to return to economic growth. The formal IMF-led recovery programme ended in August 2011, but on the Icelandic government’s request the IMF has until further notice kept its office in Reykjavik operative, in an advisory function. Strict capital controls are still in place.

In 2010 Iceland's GDP was EUR 9.3 billion (GBP 8.3bn). Consumer price index (inflation) rose by around 2.8% in 2010 and Wage index rose by around 4.4%. Inflation increased in 2011 and had reached 6.5 percent in January 2012.

In December 2009, the Icelandic Parliament agreed the terms of a loan with the UK and Netherlands Governments to enable Iceland to discharge their obligations to Icesave depositors under the Deposit Guarantee Scheme. The Icelandic President however, subsequently refused to sign the bill into law and the following referendum on 6 March 2010 resulted in a ‘no’ vote by the Icelandic people.

A new round of negotiations followed. The new Icelandic negotiating team, included representatives of the opposition. In December 2010 a new draft agreement, commonly known as “Icesave III”, was presented. It contained much more favourable repayment terms for Iceland than the previous, failed, agreements. In February 2011 a government bill on the ratification of “Icesave III” was passed with the support of more than two thirds of the Althingi. However, the President again refused to sign it into law, leading to another national referendum which was held on 9 April 2011. Almost 60 percent of voters rejected it. No further negotiations are planned between Iceland, the UK and the Netherlands. Instead, the EFTA Surveillance Authority has started legal proceedings against Iceland for alleged breach of the EEA Agreement. The case is expected to be ruled on by the EFTA Court in due course, possibly by the end of 2012.

www.hagstofa.is (http://www.hagstofa.is)

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HISTORY

Iceland was the last country in Europe to be settled, by Vikings and Celts, in the 9th and 10th century AD. The nation converted to Christianity in 1000 (the year in which Iceland-born Leif Eríksson was the first European to set foot in the Americas). From the 1260’s Iceland was a dependency of the Norwegian and later the Danish kingdom. Iceland gained Home Rule in 1904 and then separate sovereign statehood under the Danish crown in 1918. During WWII, the country was benignly occupied, first by British and then by US forces. Iceland became an independent republic on 17 June 1944. After the Second World War Iceland went on to become one of the most prosperous countries in the world. However, the collapse of the banking system in 2008 raised doubts over whether the economy had been built on sufficiently sound foundations.

Iceland has extended its territorial waters several times since the end of the 1950s to protect its fishermen and their main catch of Atlantic cod from foreign fleets.

Iceland is not a member of the European Union (EU), but is closely associated through its membership of the European Economic Area (EEA) since 1994. In July 2009 Iceland’s new government decided to apply for full membership of the EU. Accession negotiations were opened on 27 July 2010. Although it has no armed forces, Iceland is a founding member of NATO and in 1985 it declared itself a nuclear-free zone.

Traditionally a whaling nation, Iceland abandoned the practice in 1989 in line with an international moratorium. It later resumed scientific whaling, intended to investigate the impact of whales on fish stocks, and in 2006 it announced a return to commercial hunts. The move was condemned by environmental groups and the majority of the international community.

BBC News Country Timeline: Iceland (http://news.bbc.co.uk/hi/english/world/europe/country_profiles/newsid_1025000/1025227.stm)

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INTERNATIONAL RELATIONS

The Icelandic government has made clear its continued support for the EEA Agreement between the European Free Trade Association (EFTA) and the European Union, which came into force in January 1994. As part of the European Economic Area, Iceland is already a member of the EU's single market. It is also a member of the Schengen Area which removes border controls between member states.

Iceland formally applied for EU membership on 16 July 2009. On 24 February 2010, the European Commission published their Opinion in which they recommended opening accession negotiations. At an intergovernmental conference between Iceland and the 27 EU member states on 27 July 2010 accession negotiations were formally opened. The accession process is based on strict criteria that Iceland, like all candidate states, will have to meet. By the end of 2011, eleven out of a total of 35 negotiating chapters had been opened and eight provisionally closed.

Iceland is active in Nordic and Arctic regional co-operation. Iceland shares the main ideals and objectives of its NATO allies in world affairs. In 2006 the United States closed the military base it had operated in Iceland since 1951.

Iceland has no armed forces of its own but in 2001 established an Icelandic Crisis Response Unit (ICRU) with a roster of over 100 experts (police, medics, legal professionals, engineers etc) specially trained to be deployed on multi-national missions to trouble spots at short notice, such as Kosovo or Afghanistan. Since the closure of the US military base in Keflavik, NATO allies periodically operate air policing in the Icelandic air space. Iceland has also responded to the departure of the American Iceland Defence Force by signing bilateral agreements/Memorandum of Understanding (MoU) on enhanced security cooperation with its nearest neighbours around the North Atlantic, including the UK. The bilateral defence agreement with the US also remains in force.

Iceland's relations with the UK

Despite the hiatus of the Cod Wars in the mid 1970s, bilateral relations with the UK have always been excellent, reflecting historical ties and many common interests including free trade, defence, environmental protection and international peace and good order. The banking crisis and financial collapse in Iceland at the end of 2008, and recent developments on the repayments of the loan to the UK under the Financial Guarantee Directive did however put some strain on relations.

There have also been disagreements about whaling. Iceland resumed commercial whaling in 2006 against the wishes of the UK, the EU and the majority of the international community. In 2009 Iceland dramatically increased their whaling quota to 150 ‘endangered’ Fin whales and 100 Minke whales each year. The UK and the EU continue to call for Iceland to cease its whaling activities and will continue to press this issue as part of Iceland's EU Accession process. Similarly, fisheries issues can occasionally cause tensions. In recent years, Iceland and the Faroe Islands have announced unilateral quotas for catches of mackerel which have been significantly higher than historical fishing patterns. Norway and the EU have criticised these as unsustainable and a danger to the future viability of the fish stocks. As with whaling, the EU will seek to address fisheries issues as part of the Accession process.

Recent Visits

Inward

-- Össur Skarphéðinsson, Minister for Foreign Affairs - March 2009, June 2010, and London Conference on Libya 31 March 2011 (meeting Minister for Europe David Lidington)

-- Össur Skarphéðinsson, Minister for Foreign Affairs – June 2010

-- Jón Bjarnason, Minister for Fisheries and Agriculture – June 2010

-- PM Jóhanna Sigurðardóttir – January 2011 (UK-Nordic-Baltic summit in London)

-- Steingrímur Sigfússon, Minister of Economic Affairs and Minister for Fisheries and Agriculture – February 2012 (meeting DEFRA Minister Richard Benyon and opening the new Grimsby Fish Market)

Outward

-- Jim Murphy, Secretary of State for Scotland – November 2008

-- Stephen O’Brien, Permanent Under-Secretary of State for International Development – February 2012

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GEOGRAPHY

Iceland is a sparsely-populated volcanic island, 103,000 km2 in size, situated to the west of Norway and to the east of Greenland. It is three hours flying time from London and two from Glasgow. Geologically speaking, it is the youngest country in the world.

Iceland is a volcanic island, 103,000 km2 in size, situated to the west of Norway and to the east of Greenland. It is three hours flying time from London and two from Glasgow. Geologically speaking, it is the youngest country in the world.

Due to its location between the Eurasian continental plate and the North American plate, Iceland is volcanically and geologically very active. About 79% of the land, which is of recent volcanic origin, consists of glaciers, lakes, mountainous lava desert and other wasteland. Around 28% of the land is used for grazing, 1% is cultivated and only a very small part of the land supports forest and woodlands.

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TRADE AND INDUSTRY

After several years of decreasing GDP, in 2010, Iceland's GDP increased by 3.1% in real terms. At the same time, exports grew by 3.2% and imports by 6.4%. This resulted in a trade surplus for the second year in a row.

In 2010 (the latest figures available), EEA countries accounted for 81.8% of exports and 61% of imports. The Netherlands was the largest trading partner for exports in 2010, accounting for 33.98% of the total. The largest share of imports came from Norway, amounting to 9.06%.The United Kingdom was the third largest buyer of Icelandic exports in 2010, being second in the previous two years. Exports to the United Kingdom amounted to 56.712,3 million ISK (10.1% of total exports). This was an increase in value of 12.7% from the previous year. Marine products accounted for 82.5% of all exports to the UK - mainly cod and haddock.

In 2010, the United Kingdom was the tenth largest importer into Iceland, behind Norway, Denmark, Sweden, Finland, Germany, The Netherlands, China, Mexico and the USA, despite having a roughly 20% increase in value. Imports from the UK were mostly machinery and transport equipment (21.4%), petroleum (20.5%), petroleum related products, food and drink and pharmaceuticals.

UK Trade and Investment Country Profile: Iceland (http://www.uktradeinvest.gov.uk/ukti/iceland)

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POLITICS

Following the fall of the previous coalition of the conservative Independence Party and the SDA in the January 2009 “Saucepan revolution” - so called because the non-violent protesters carried pots and pans when protesting outside the Althingi (Icelandic Parliament) - a minority interim government consisting of the SDA and the Left-Green Movement took power.

Parliamentary elections were held on 25 April 2009 following strong pressure from the public as a result of the Icelandic financial crisis. The SDA and Left-Green Movement won a majority of the seats and formed a new government that took office on 10 May 2009. The big loser was the Independence Party, which had been in power for 18 years until January 2009: it lost a third of its support and nine seats in the Althingi.

Since September 2010 Prime Minister Jóhanna Sigurðardóttir has gradually reduced the number of Cabinet Ministers from twelve to nine in two reshuffles, the latest in December 2011.

The nine ministers in the reshuffled cabinet are:
-- Prime Minister: Jóhanna Sigurðardóttir (SDA)
-- Minister of Fisheries and Agriculture and Minister of Economic Affairs (combined Post): Steingrímur J Sigfússon (LGM)

-- Minister of Welfare: Guðbjartur Hannesson (SDA)
-- Minister of Industry, Energy and Tourism: Katrín Júlíusdóttir (SDA) - On maternity leave since 1 February 2012
-- Minister for Foreign Affairs: Össur Skarphéðinsson (SDA)
-- Minister of the Interior: Ögmundur Jónasson (LGM)
-- Minister of Finance and (temporarily) Industry, Energy and Tourism: Oddný G. Harðardóttir(SDA)
-- Minister of Education, Science and Culture: Katrín Jakobsdóttir (LGM)
-- Minister for the Environment: Svandís Svavarsdóttir (LGM)

After three Left-Green MPs defected from the party in Spring 2011 (two of them citing opposition to EU accession as their reason) the coalition has been left with the narrowest possible majority in the Althingi, 32 to 31. However, following the vote on the motion of no confidence on 13 April 2011, two thirds of the Althingi representatives rejected a further resolution calling for the dissolution of parliament and early elections. The next Parliamentary elections will be held no later than May 2013.

Since the beginning of 2012, three new political parties have formed. The new parties plan to nominate candidates in all constituencies in the next parliamentary elections, hoping to capitalize on the increased volatility of voter preferences which has been repeatedly documented in opinion polls since 2009.
President Ólafur Ragnar Grímsson started his fourth term on 24 May 2008. In 1996 President Grimsson succeeded Vigdis Finnbogadottir, who had become the world's first elected female President in 1980. Presidential elections will be held on 30 June 2012.

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Last Updated: March 2012

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