Island country in the North Atlantic Ocean, situated south of the Arctic Circle, between Greenland and Norway.
Government Iceland is a multiparty parliamentary democracy. The 1944 constitution provides for a president, as a ceremonial head of state, and a legislature, the 63-member Althing, both elected by universal suffrage for a four-year term. Voting is by a system of proportional representation, from six constituencies, that ensures, as nearly as possible, equality between the proportions of the votes cast and seats won. This has meant that governments have almost always been coalitions of two or more parties. The prime minister and cabinet are appointed by the president on the basis of parliamentary support, and they are collectively responsible to the Althing.
History According to literary tradition, formerly uninhabited Iceland was first settled in the late 8th century by Irish monks. However, archaeological evidence shows the area was first settled by Norwegians between 870 and 930, during the era of Viking expansion and exploration.
The early period of settlement The first Norwegian settlement was made in 870 by Ingolfur Arnason on the south coast, and was established permanently four years later at what is now Reykjavik, the settlers being attracted by its geothermal streams. Other settlers soon followed, and in the course of 60 years all the habitable parts of the coast were settled.
At this stage the settlers still worshipped the old Norse gods, and government was at first in the hands of the overseer of the temple in each settlement. Later, when the separate jurisdictions were joined together, a kind of aristocratic republic was formed, known as the Icelandic Commonwealth. The ruling chiefs established in 930 a supreme representative assembly, the Althing, which is the oldest still-functioning parliament in the world. Christianity was adopted as the national religion by the Althing in 1000, under pressure from Europe, and a bishopric was established in 1056. It was from Iceland that in around 985 Eric the Red embarked on his westward voyage, during which he discovered Greenland.
Danish rule and national awakening In the 12th century, power became increasingly concentrated in the hands of a few rich landowners, who engaged in bitter power struggles. Haakon IV of Norway took advantage of these dissensions to make Iceland a Norwegian protectorate in 1262. When the crowns of Denmark and Norway were united in 1380, power passed, in effect, to the Danish throne. Iceland languished under Danish rule, being forced to accept Lutheranism in 1550 by Christian III, and suffering under a ruinous Danish trade monopoly in the 17th and 18th centuries. Iceland remained attached to Denmark after Norway separated and became independent in 1814.
Under the leadership of the great scholar and statesman Jón Sigurdsson (1811–1879) the 19th century was a time of great national awakening in Iceland. Denmark granted Iceland home rule in 1874. However, the country was poor, isolated, and materially backward, though the standard of popular education had always been high. Sigurdsson was followed as national leader by Bjorn Jonsson, whose work was continued by his son, Sveinn Björnsson (1881–1952), as well as by the poet Hannes Hafstein (1861–1952). Under more tolerable economic conditions the pace of progress became faster.
The early 20th century In 1918 Iceland again became a sovereign state, but united as a constitutional monarchy to Denmark with one king. Iceland had its own flag, but Denmark represented it for foreign and defence affairs. World War I brought some trade benefit to Iceland. Previously it had been without its own merchant fleet, and thus dependent upon Denmark, but it now set about building one. The fishing fleet was expanded and modernized, and means of communication were improved. In sparsely populated and mountainous districts, roads for motor traffic were begun, and reclamation of land was accelerated. Inland passenger traffic by air began in 1928, but for another 12 years it was on a small scale, largely because there were no airfields and no capital available for building them.
World War II and independence Nazi Germany occupied Denmark in April 1940, cutting off communications with Iceland. In response, the Althing voted for Iceland to take control of its own foreign relations. In May 1940 British naval and military forces occupied Iceland to forestall a German landing there and Icelanders agreed to cooperate with the 25,000 British occupying forces. In 1941 the Althing decided to establish a republic; however, pending the formal annulment of the union with Denmark, a regent was appointed from year to year.
During the war US troops joined the British forces occupying Iceland. The British guarantee of the future of Iceland's independence was repeated by US President Roosevelt, who said that the US government did not wish to see any change in the existing sovereignty of the country. Iceland became a key strategic staging post in the lifeline between the USA and Britain.
By a referendum held on 23 May 1944 the Act of Union of 1918 was repealed and a new constitution adopted providing for a republican form of government. Iceland become fully independent on 17 June 1944, and Sveinn Björnsson (1881–1952) became its first president. Executive power was put in the hands of a ministry in Reykjavik, responsible to the national legislative assembly or Althing, which (until 1991) comprised two houses.
Post-war developments World War II and the Anglo-American occupation effected revolutionary changes in Iceland. Capital flowed into the country and the US forces brought powerful machinery for road-making and construction. Large farm machinery could be bought and land reclamation undertaken on a huge scale. Roads could now be constructed 20 times more rapidly than before. Large-scale electrification and housing schemes were embarked upon in all parts of Iceland.
In 1949 Iceland became a member of the North Atlantic Treaty Organization (NATO) and the Council of Europe, and in 1958 it agreed to US forces being stationed there. It joined the Nordic Council in 1953, and became a founder member of the European Free Trade Association (EFTA) in 1960. It became a member of the European Economic Area.
The Cod Wars Most of Iceland's external problems have been connected with the overfishing of the waters around its coasts. The Icelandic government's decision to extend Iceland's fishing limits from 6.4 to 19.3 km/4 to 12 mi as from September 1953 led to a prolonged dispute with Britain, whose trawlers were those most affected. There was considerable bitterness on both sides before the dispute was ended in March 1961. Britain then withdrew its objections to the 19.3 km/12 mi limit, but was permitted certain fishery concessions within the new limits for the following three years.
Trouble arose again in 1973 over Iceland's decision to extend its limits to 80.5 km/50 mi, but a temporary agreement was reached with Britain for limited fishing rights within the 80.5 km. In 1975, however, Iceland announced its decision to extend its limits to 322 km/200 mi, its fears about overfishing being exacerbated by declining fish exports, heavy devaluation, and rampant inflation. In November 1975, the 1973 agreement expired, and failure to reach a new agreement led to the third and most serious ‘Cod War’. In February 1976 Iceland broke off diplomatic relations with Britain (the first ever diplomatic break between two NATO countries). A temporary agreement in June 1976, accompanied by a resumption of diplomatic relations, was followed by renewed negotiations, and by the end of the year Britain agreed to recognize the 322 km/200 mi limit.
Since the late 1970s, a system of individual transferable quotas in the Icelandic fisheries has been in operation. In 1992 Iceland defied the worldwide ban on whaling and resumed its own whaling industry.
Politics in the 1980s and 1990s Since independence Iceland has been governed by coalitions of the leading parties, sometimes right- and sometimes left-wing groupings, but mostly moderate. The centre and right-of-centre parties are the Independent Party (IP) and the Social Democratic Party (SDP), while those to the left are the Progressive Party (PP) and the People's Alliance (PA). More recent additions include the Women's Alliance.
Domestically, governments have been faced with the recurring problem of inflation. In 1985 the Althing unanimously declared the country a nuclear-free zone, banning the entry of all nuclear weapons.
In 1980 Vígdis Finnbogadóttir became the first woman to be the democratically elected president of a republic, serving until 1996, when Ólafur Ragnar Grímsson was elected president (being re-elected in 2000, 2004, 2008, and 2012). In April 1991 Davíd Oddsson, leader of the IP, became prime minister, and formed a centre-right IP-SDP coalition government. A new free-market IP-PP coalition was formed under Oddsson after the April 1995 general election, which privatized the state-owned telecoms operator and reduced tax rates.
With economic growth averaging 4% a year from the mid-1990s, Iceland became one of the world's wealthiest countries. The fishing industry still supplies 40% of export earnings and employs 8% of the workforce, but tourism and technology industries are of growing importance. Successive governments did not seek membership of the European Union (EU) because Iceland wanted to retain control over its fishing resources.
Iceland has been supportive of US foreign policy and was a member of the ‘coalition of the willing’ during the 2003 US-led invasion of Iraq.
Financial collapse in 2008–09 In 2004, Oddsson stepped down as prime minister and was replaced by Halldór Ásgrímsson, leader of the PP. In June 2006, Geir Haarde, the new leader of the IP and a former finance minister, took over as prime minister. He held on to power after the May 2007 general election, when the Social Democratic Alliance joined the governing coalition. In October 2006, Iceland lifted its long-established moratorium on commercial whaling.
The Haarde government sought to cool down an overheating economy, caused by a housing boom, deregulation, and privatization: GDP increased by over 20% 2003–08. By the start of 2008 gross external indebtedness was 550% of GDP and financial sector assets 1,000% of GDP. The global financial crisis and ‘credit crunch’ badly affected Iceland's banking sector, which had lent and borrowed extensively overseas. By the late summer of 2008, its financial sector was in meltdown and in October 2008 the government nationalized its three main banks. The currency went into freefall and in November 2008 Iceland had to turn to the International Monetary Fund (IMF) for a $2.1bn emergency loan and $2.5bn in loans from Nordic countries. In return, the government agreed to implement an austerity programme, leading to a 10% fall in GDP in 2009.
The economic collapse led to anti-government demonstrations. Haarde agreed to call an early general election in April 2009, but two months ahead of these the Social Democratic Alliance withdrew from the governing coalition and its leader, Jóhanna Siguroardottir, became the country's first female (and the world's first openly gay) prime minister. She formed a coalition with the Left-Green Movement, which retained power after the April 2009 general election.
The beginnings of recovery The new government worked to achieve economic stability and implement IMF-approved measures, so that economic growth resumed in 2010, unemployment began to fall in 2011, and by 2012 credit rating agencies had improved their assessments of the country's financial strength. In February 2009, David Oddsson was removed as head of the central bank, which had failed to foresee the banking collapse, and in July 2009 Iceland applied for membership of the EU and the country began accession talks in 2010.
In January 2010 relations with the UK and Netherlands deteriorated when President Grimmson controversially vetoed a bill passed by the Althing to reimburse those countries for the $5.4 billion loan they had provided to Iceland to enable it to compensate investors in their country who had invested in the collapsed Icesave bank. But in March 2010 voters overwhelmingly approved his decision with a 93% vote in a referendum.
However, the April 2013 general election saw a voter backlash against the Social Democrats' austerity measures, which suffered the worst defeat of any ruling party in Iceland's history. This was because, although the economy had stabilized, real wages remained far below their pre-crisis levels and household debt levels were high. The opposition, conservative, and Eurosceptic PP and IP returned to power, each winning 19 seats. They formed a coalition government, with the PP's Sigmundur Gunnlaugsson becoming prime minister. He promised to hold a referendum on whether or not to proceed with Iceland's EU membership negotiations.
crater lake, Iceland
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