Republic of Iceland
Area: 103,000 sq. km. (39,600 sq. mi.); about the size of Virginia or slightly larger than Ireland.
Cities: Capital--Reykjavík (pop. 117,898). Other towns--Kópavogur (28,665), Hafnarfjörður (24,895), Akureyri (17,278).
Climate: Maritime temperate.
Highest elevation: Hvannadalshnjúkur at Vatnajökull Glacier, at 2,110 meters (6,923 ft.).
Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population (January 1, 2009): 319.368
Annual growth rate (2008): 0.3%.
Ethnic group: Relatively homogenous mixture of descendants of Norwegians and Celts.
Religion: Evangelical Lutheran, 86%.
Education: Compulsory up to age 16. Attendance--99%. Literacy--99.9%.
Health: Infant mortality rate (2001-2006 average)--2.4/1,000. Life expectancy (2006)--men 79.4 years, women 83 years.
Work force (2008, 178,000): Commerce--32.2%; manufacturing--8.2%; fishing/fish processing--3.4%; construction--10.05%; transport and communications--6.3%; agriculture--2.3%; government, education, and health--27.2%; other services--9.55%. Unemployment (March 2009): 10.5%.
Type: Semi-presidential, parliamentary.
Independence: 1918 (became "sovereign state" under Danish Crown); 1944 (establishment of republic).
Branches: Executive--president (head of state), prime minister (head of government), cabinet (12 ministers). Legislative--63-member unicameral parliament (Althingi). Judicial--Supreme Court, district courts, special courts.
Subdivisions: 26 administrative districts and 79 municipalities.
Major political parties: Independence (IP), Progressive (PP), Social Democratic Alliance (SDA), Left-Green Party (LGP), Liberal Party (LP).
Suffrage: Universal 18 years and above.
National holiday: June 17, anniversary of the establishment of the republic.
GDP (2008): $12.1 billion.
GDP growth rate; (2006): 4.2%; (2007) 3.8%. (2008) 0.3%.
Per capita GDP (2008): $52,088.
Inflation rate (2007): 5.1%; (January 2009): 18.6%. (March 2009): 15.9%
Central government budget (2009): $4.6 billion. (2008): $6.7 billion.
Annual budget deficit (2009 projected): $1.5 billion (11% of GDP)
Net central government debt: (2007) 4.4% of GDP (2008) 27.8% of GDP (2009 - predicted) 57.8% of GDP.
Natural resources: Marine products, hydroelectric and geothermal power.
Agriculture: Products--potatoes, tomatoes, cucumbers, carrots, roses, livestock.
Industry: Types--aluminum smelting, fishing and fish processing technology, ferro-silicon alloy production, hydro and geothermal power, tourism, information technology.
Trade: Exports of goods (2007) -- $4.8 billion: marine products 41.8% industrial products 38.9%, agriculture 1.1%, and miscellaneous 18.2%. Partners (2008)--EEA 80.6% (Netherlands 34.3%, Germany 11.4%, U.K. 11.6%, Ireland 0.3%, Spain 3.8%, Norway 4.4%, Denmark 3.1%); U.S. 5.5% ($250 million 25,605.6); Japan 4.4%. Imports (2007)--$6.7 billion: industrial supplies 26.7%; capital goods, parts, accessories 21.5%; consumer goods 15.7%; transport equipment 20.5%; food and beverages 6.8%; fuels and lubricants 8%. Partners (2008)--EEA 64.8% (Germany 10.3%, Sweden 9%, Denmark 7.3%, Netherlands 6.1%, U.K. 4.4%, Norway 11.2%, Switzerland 3.2% ,Italy 2.8%); U.S. 8.0% ($341 million); Japan 3.7%.
Iceland is a volcanic island in the North Atlantic Ocean east of Greenland and immediately south of the Arctic Circle. It lies about 4,200 kilometers (2,600 mi.) from New York and 830 kilometers (520 mi.) from Scotland. About 79% of Iceland's land area, which is of recent volcanic origin, consists of glaciers, lakes, a mountainous lava desert (highest elevation 2,000 meters--6,590 ft.--above sea level), and other wasteland. About 28% of the land is used for grazing, and 1% is cultivated. The inhabited areas are on the coast, particularly in the southwest where about 60% of the population lives. Because of the Gulf Stream's moderating influence, the climate is characterized by damp, cool summers and relatively mild but windy winters. In Reykjavík, the average temperature is 11°C (52°F) in July and -1°C (30°F) in January.
Most Icelanders are descendants of Norwegian settlers and Celts from the British Isles, and the population is remarkably homogeneous. According to Icelandic Government statistics, 93% of the nation's inhabitants live in urban areas (localities with populations greater than 200) and about 60% live in the Reykjavík metropolitan area. Of the Nordic languages, the Icelandic language is closest to the Old Norse language and has remained relatively unchanged since the 12th century. About 91% of the population belongs to the state church, the Evangelical Lutheran Church, or other Lutheran Churches. However, Iceland has complete religious liberty, and about 20 other religious congregations are present.
Unlike its literature, Iceland's fine arts did not flourish until the 19th century because the population was small and scattered. Iceland's most famous painters are Ásgrímur Jónsson, Jón Stefánsson, and Jóhannes Kjarval, all of whom worked during the first half of the 20th century. The best-known modern sculptor, Ásmundur Sveinsson (1893-1982), drew his inspiration from Icelandic folklore and the Sagas for many of his works. Today, Kristján Jóhannsson and Garðar Thór Cortes are Iceland's most famous opera singers, while pop singer Björk and progressive rock band Sigur Rós are well known internationally.
Iceland was settled in the late 9th and early 10th centuries, principally by people of Norse origin. In 930 A.D., the ruling chiefs established a republican constitution and an assembly called the Althingi (Alþingi) the oldest parliament in the world. Iceland remained independent until 1262, when it entered into a treaty establishing a union with the Norwegian monarchy. Iceland passed to Denmark in the late 14th century when Norway and Denmark were united under the Danish crown.
German occupation of Denmark in 1940 severed communications between Iceland and Denmark. Consequently, Iceland moved immediately to assume control over its own territorial waters and foreign affairs. In May 1940, British military forces occupied Iceland. In July 1941, responsibility for Iceland's defense passed to the United States. Following a plebiscite, Iceland formally became an independent republic on June 17, 1944. In October 1946, the Icelandic and U.S. Governments agreed to terminate U.S. responsibility for the defense of Iceland, but the United States retained certain rights at Keflavík. Iceland became a charter member of the North Atlantic Treaty Organization (NATO) in 1949. After the outbreak of hostilities in Korea in 1950, and pursuant to the request of NATO military authorities, the United States and Iceland agreed that the United States should again make arrangements for Iceland's defense. A bilateral defense agreement signed on May 5, 1951, remains in force, even though the U.S. military forces are no longer permanently stationed in Iceland. Iceland is the only NATO country with no standing military of its own.
The president, elected to a 4-year term, has limited powers. When Iceland became a republic in 1944, the post of president was created to fill the void left by the Danish king. Although the president is popularly elected and has limited veto powers (he can force a public referendum on a proposed law by refusing to sign it--a power that has only once been exercised), the expectation is that the president should play the same limited role as a monarch in a traditional parliamentary system.
The prime minister and cabinet exercise most executive functions. The parliament is composed of 63 members, elected every 4 years unless it is dissolved sooner. Suffrage for presidential and parliamentary elections is universal for those 18 and older, and members of the parliament are elected on the basis of parties' proportional representation in six constituencies. The judiciary consists of the Supreme Court, district courts, and various special courts. The constitution protects the judiciary from infringement by the other two branches.
Principal Government Officials
President--Ólafur Ragnar Grímsson
Prime Minister--Jóhanna Sigurðardóttir
Foreign Minister and Minister of Industry--Össur Skarphéðinsson
Minister of Finance and Minister of Agriculture and Fisheries--Steingrímur J. Sigfússon
Minister of Justice and Ecclesiastical Affairs--Ragna Árnadóttir
Minister of Communications--Kristján L. Möller
Minister for the Environment and Nordic Cooperation--Kolbrún Halldórsdóttir
Minister of Business Affairs--Gylfi Magnússon
Minister of Health--Ögmundur Jónasson
Minister of Social Affairs--Ásta Ragnheiður Jóhannesdóttir
Minister of Education, Science and Culture--Katrín Jakobsdóttir
Speaker of Althingi--Guðbjartur Hannesson
Ambassador to the U.S.--Hjálmar W. Hannesson
Ambassador to the UN--Gunnar Pálsson
Ambassador to NATO--Þorsteinn Ingólfsson
Ambassador to the EU--Stefán Haukur Jóhannesson
Iceland maintains an embassy in the United States at 1156 - 15th Street, NW, Suite 1200, Washington, DC 20005 [tel. (202) 265-6653], and a consulate general at 800 Third Ave, 36th floor, New York, NY 10022 [tel. (212) 593-2700]. Iceland also has 25 honorary consulates in major U.S. cities.
Iceland's current government coalition is a minority coalition between the center-left Social Democratic Alliance (SDA) and the leftist, environmentally focused Left-Green Movement (LG). The coalition holds only 27 out of 63 seats in parliament, and depends on the centrist agrarian Progressive Party (PP) for support. The SDA-LG coalition took power after the previous government of the conservative Independence Party (IP) and the SDA collapsed in January 2009, and will remain in office until early elections on April 25, 2009.
Following regular parliamentary elections in 2007, the IP and SDA formed a strong majority with then-IP Chair Geir Haarde as Prime Minister and then-SDA Chair Ingibjörg Sólrún Gísladóttir as Foreign Minister. However, when the Icelandic banking sector collapsed in fall 2008, taking the nation's economy with it, opinion polls showed less than 50% of the public had confidence in the government's crisis management. The resulting protests were Iceland's most serious since the riots over NATO membership in 1949. Tensions between the IP and SDA resulted in the breakup of the coalition on January 26, 2009 and the formation of a leftist minority government. At the same time, SDA Chair Gísladóttir left politics to focus on her recovery from treatment for a benign brain tumor. Former Minister of Social Affairs Jóhanna Sigurðardóttir became Iceland's first female Prime Minister, and subsequently became SDA Chair in March 2009.
The SDA formed in 2000 from three leftist parties--the Social Democratic Party, the People's Alliance, and the Women's List--which formed an electoral coalition in the 1999 parliamentary campaign to challenge the long-dominant Independence Party. Though this effort failed in 1999, under Gísladóttir's leadership the SDA was eventually able to rebound and form a majority with the IP in 2007. The party has found it difficult to reconcile the widely varying foreign policy views of its members, which range from strong support for NATO membership to pacifism and neutrality. The SDA is the most openly pro-EU of Iceland's political parties.
Finance Minister Sígfusson split from the leftist electoral coalition in 1999 and formed the Left-Green Movement. The Left Greens won a respectable 9% of the vote (5 seats) in 2003, but in the 2007 election they improved significantly, with 14% of the total vote (9 seats). As its name implies, the party is focused on a Nordic socialist model of governance with a strong emphasis on environmental issues. It is formally against EU membership for Iceland but is open to change should the Icelandic public demand it.
Iceland's current political uncertainty follows nearly two decades of relative stability, much of it marked by an Independence-Progressive coalition that was in power from 1995-2007. Longtime IP leader Davíð Oddsson was Prime Minister 1991-2004, making him the longest-serving prime minister in Europe. IP Deputy Chair Geir Haarde succeeded Oddsson as party chair when the latter retired from politics in 2005. At the same time, Haarde took over as Foreign Minister, and on June 15, 2006 he became Prime Minister when then-PP leader and Prime Minister Halldór Ásgrímsson resigned.
The conservative, trans-Atlantic oriented IP elected parliamentarian Bjarni Benediktsson to follow former PM Haarde as Party Chairman in late March 2009, after Haarde announced in January his intent to leave politics while undergoing treatment for esophogeal cancer. Following the economic collapse of 2008, the IP undertook a thorough review of its policy on joining the EU, concluding that the question should be decided by national referendums before and at the conclusion of membership talks with Brussels.
The centrist agrarian Progressive Party has been a party to government for over 30 years in the past four decades. Its support dropped from 23% in the 1995 parliamentary election to 12% in 2007. The party has dealt with internal instability in the past few years, and power struggles have lead to frequent change in the party's leadership. Current Chairman Sigmundur Davíð Gunnlaugsson was elected at the party's national congress in January 2009, following the sudden resignation of Guðni Ágústsson in November 2008. Ágústsson himself had replaced Jón Sigurðsson after the party's disastrous showing in the 2007 elections.
Iceland's Liberal Party, devoted to changing the current fisheries management system, clung to a 6% share of the vote in 2007 and hopes to make it over the 5% threshold for representation in the Alþingi in 2009. Other movements that have emerged since the protests of fall 2008 and winter 2009 have fared poorly in opinion polls, and do not stand to win any seats in the April 2009 elections.
Iceland's current President is Ólafur Ragnar Grímsson, a former political science professor who led the far-left People's Alliance in 1987-95 and served as Finance Minister in 1988-91. Although Grímsson won office with only a 41% plurality in 1996, he was not challenged for re-election in 2000 and was re-elected again on June 26, 2004. In 2008, Grímsson was again re-elected by default. This follows a well-established tradition of giving deference to sitting presidents. Once in office, a president can generally count on serving as many terms as he or she likes, assuming good behavior. Reflecting the belief that the president is "above politics," presidential candidates run for election as individuals--since 1952, political parties have played no role in nominating or endorsing candidates. President Grímsson has occasionally drawn criticism that he breaches the bounds of presidential etiquette by being too outspoken on sensitive political issues.
Iceland, a stable democracy with a dynamic consumer economy, suffered an economic meltdown in October 2008. The banking sector collapsed and the Icelandic government turned to the International Monetary Fund for assistance. This was a marked change from the economic boom Iceland had experienced from several years of strong economic growth spurred by economic reforms, deregulation, and low inflation, averaging around 4%. The economy suffered an initial setback in spring 2006 when credit rating agencies and other international financial firms released a number of reports raising questions about the activities and stability of Iceland's major banks and the state of the Icelandic economy. These reports were widely covered in the international financial press, causing a marked drop in the value of shares listed on the Icelandic stock exchange and of the Icelandic krona, but the market recovered as reforms were made in the banking sector. Then the financial sector was hit hard by the global credit crisis beginning in 2007. Although Icelandic banks had limited sub-prime mortgage market exposure, they were affected by the general lack of available capital. In the first six months of 2008, the Icelandic krona began devaluing and inflation rose to nearly 12%, Difficulties increased as Icelandic banks were not able to get financing on the global market and they were forced to turn to their lender of last resort, the Central Bank of Iceland. In October 2008, the Central Bank bailed out one major bank, but then a week later took possession of the three largest banks. This set off the financial crisis as the size of the banks' liabilities were estimated to be multiple times GDP. Iceland turned to the IMF for a $5.1 billion loan package that included bilateral loans from the Nordics and other countries. The long-term ramifications of the financial crisis are still developing, but so far have resulted in a dramatic rise in unemployment from less than 2% to 10.5% and widespread business closures and bankruptcies. Political turmoil resulted in the resignation of the Cabinet and installation of an interim government as well as the replacement of the Central Bank and Financial Supervisory Authority leadership. At the end of 2008, inflation was at a rate of 18.6% and the currency had depreciated by roughly 90%.
Iceland has no railroads. Organized road building began about 1900 and has greatly expanded in the past decade. The current national road system connects most of the population centers along the coastal areas and consists of about 13,000 kilometers (8,125 mi.) of roads, of which about 4,800 kilometers (2,982 mi.) are paved. Regular air and sea service connects Reykjavík with the other main population centers.
The U.S. and Iceland signed a bilateral agreement in 1951 stipulating that the U.S. would make arrangements for Iceland's defense on behalf of NATO and providing for basing rights for U.S. forces in Iceland. In March 2006 the U.S. announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after 55 years. The Government of Iceland expressed disappointment, and even opposition politicians opposed to the U.S. military presence criticized the manner of the closing, but bilateral discussions ensued to explore new ways of ensuring the country's security, with an emphasis on a "visible defense." Negotiations concluded with a Technical Agreement on base closure issues (e.g., facilities return, environmental cleanup, residual value) signed on September 29, 2006, and a "Joint Understanding" on future bilateral security cooperation (focusing on defending Iceland and the North Atlantic region against emerging threats such as terrorism and trafficking) signed by the Secretary of State and Icelandic Prime Minister and Foreign Minister in Washington on October 11, 2006. The United States also cooperated with local officials to mitigate the impact of job losses at the Air Station, notably by encouraging U.S. investment in industry and tourism development in the Keflavík area. The Government of Iceland formed a public corporation to oversee redevelopment of the former base site. In fall 2007 the university-level "Keilir Atlantic Center of Excellence" began its operations with a focus on aviation, science and energy technology, and innovation. Former base housing is now rented by roughly 1100 university students (at Keilir as well as institutions in Reykjavik) and commercial redevelopment of other areas of the former base is proceeding.
The Government of Iceland contributes financially to NATO's international overhead costs and recently has taken a more active role in NATO deliberations, planning, and peacekeeping. Iceland hosted the NATO Foreign Ministers' Meeting in Reykjavík in June 1987 and again in May 2002. Iceland hosted the NATO Military Committee in April 2007 and hosted the NATO Parliamentary Assembly in October 2007.
Iceland maintains diplomatic and commercial relations with practically all nations, but its ties with other Nordic states, with the United States, and with the other NATO member states are particularly close. Icelanders remain especially proud of the role Iceland played in hosting the historic 1986 summit in Reykjavík between President Reagan and Soviet leader Gorbachev, which set the stage for the end of the Cold War.
It also is a member of the United Nations and most of its related organizations, specialized agencies, and commissions, including the International Monetary Fund, World Trade Organization, World Tourism Organization, Food and Agricultural Organization, International Atomic Energy Agency, International Civil Aviation Organization, International Fund for Agricultural Development; Industrial Development Organization; International Labor Organization, International Maritime Organization, International Telecommunications Union, UN Educational, Scientific, and Cultural Organization, Universal Postal Union, World Health Organization, and World Meteorological Organization; World Intellectual Property Organization; International Bank for Reconstruction and Development; International Development Association; International Finance Corporation Multilateral Investment Guarantee Agency and International Center for Settlement of Investment Disputes; UN Conference on Disarmament; Economic Commission for Europe; UN High Commissioner for Refugees; Office for the High Commissioner for Human Rights; Commission of Human Rights; UN Conference on Trade and Development.
U.S. policy aims to maintain close, cooperative relations with Iceland, both as a NATO ally and as a friend interested in the shared objectives of enhancing world peace; respect for human rights; economic development; arms control; and law enforcement cooperation, including the fight against terrorism, narcotics, and human trafficking. Moreover, the United States endeavors to strengthen bilateral economic and trade relations.
Principal U.S. Officials
Ambassador--Carol van Voorst
Deputy Chief of Mission--Neil Klopfenstein
Political Officer--Brad Evans
Economic/Commercial Officer--Fiona Evans
Management Officer--Michael Greer
Information Management Officer--Ted Cross
Public Affairs Officer--Kathy Eagen
Consular Officer--Amiee McGimpsey
Regional Security Officer--Jon Moody
The U.S. Embassy in Iceland is located at Laufasvegur 21, Reykjavík [tel. (354) 562-9100]. The Embassy's web site is http://iceland.usembassy.gov/.