Iceland

F

Free but Occupied

Paradoxically, Iceland celebrated its final deliverance from alien rule while still occupied by another foreign power. In 1941 the Icelandic government had been pressed by Britain and the United States to ask for U.S. protection, primarily to free the British occupation troops for service elsewhere. Contrary to contractual obligations, however, the United States did not withdraw its forces at the end of the war, instead requesting permanent military bases in the country. These were refused. A compromise agreement was made in 1946, permitting the United States control of the Keflavík airport for six and a half years. Before that pact expired, Iceland became a founding member of the North Atlantic Treaty Organization (NATO), and in 1951, during the Korean War, the United States again obtained Icelandic permission to station troops in the country, this time under a NATO umbrella.

This U.S. presence in Iceland, uninterrupted since 1941, has been profoundly divisive for Icelanders; while overwhelmingly sympathetic to Western democracies, Icelanders remain split on the issue of basing U.S. troops on their land. In 1985 the Althing unanimously passed a resolution declaring Iceland a nuclear-free zone, a measure that banned the entry of nuclear weapons into Iceland.

G

Protecting the Fisheries

Another fundamental question of national existence since World War II has involved Iceland’s efforts to protect its fisheries from foreign fleets. In 1958 Iceland decided to extend its fisheries jurisdiction from 6 to 20 km (4 to 12 mi); the British responded by sending warships to protect their trawlers in Icelandic waters. A so-called Cod War that resulted lasted until 1961, but it was renewed with two extensions of Icelandic jurisdiction over adjacent waters—to 80 km (50 mi) in 1972 and 320 km (200 mi) in 1975. The last extension triggered the most serious of the cod wars, a conflict that resulted in casualties. In 1976 Iceland temporarily severed diplomatic ties with Britain, marking the first such break between two NATO members. It was not until 1977 that Icelanders finally became the undisputed masters of their most vital resources.

Since that time, however, Iceland has become embroiled in several heated fishing disputes with other countries in areas near its territorial waters. In the early 1990s, a conflict between Iceland and Norway broke out over fishing rights in a part of the Barents Sea claimed by Iceland. A similar dispute arose between Iceland and Denmark in 1996 over fishing rights in waters between Greenland and Iceland.

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Despite Iceland’s success in securing exclusive rights to its enlarged territorial fishing grounds, the mechanization of the fishing industry eventually took a heavy toll on fish stocks. Overfishing in the 1970s and 1980s led to a decline by about one-third to one-half of the most valuable fishing stocks in Icelandic waters. Declining revenues caused by overfishing, combined with high inflation and excessive borrowing abroad, resulted in a prolonged period of high inflation and low economic growth in Iceland. Efforts to limit overfishing, including restrictions on cod fishing and a reduction in the size of Iceland’s fishing fleet, produced some signs of a recovery in fish stocks. As a result, Iceland increased fishing quotas in the 1990s and early 2000s.

H

Recent Political Developments

In 1980 Vigdís Finnbogadóttir was elected president, becoming the world’s first popularly elected female head of state. She served until 1996, when she was replaced by Ragnar Grímsson. In 2000 the parliament voted to give Grímsson a second term in office without an election, due to the president’s popularity and the lack of opponents.

In September 2004, Halldór Ásgrímsson, leader of the liberal and agrarian-oriented Progressive Party, took over as prime minister, leading a coalition government with the center-right Independence Party. Ásgrímsson’s rise to the post of prime minister was part of a deal that permitted the Progressive Party/Independence Party coalition to remain in power. Ásgrímsson’s predecessor, Independence Party leader David Oddsson, had served as Iceland’s prime minister since April 1991. Oddsson became foreign minister in the new government.

Ásgrímsson was succeeded by Geir Haarde of the Independence Party in June 2006. Haarde remained prime minister following May 2007 parliamentary elections. The results of that election, however, necessitated an end to the partnership between the Independence Party and the Progressive Party. Instead, Haarde fashioned a coalition between the Independence Party and the Social Democrats. The elections saw the Progressive Party lose seats, declining from 12 to 7, while the Independence Party increased its total from 22 to 25, and the Social Democrats won 18 seats.

I

Outlook

During the 1990s and early 2000s Iceland’s economy experienced significant economic growth, spurred in part by the diversification of manufacturing and services. New industries, including software development, biotechnology, and financial services have become important elements of Iceland’s growing economy. Today, Icelanders enjoy a standard of living among the highest in the world. One key to Iceland’s modern success is its high standard of education and cultural life. Despite hundreds of years of abject poverty, most Icelanders remained literate and educated. Thus, they were well-prepared to adapt quickly to new technological trends of the 20th and early 21st centuries.

The rapid economic advancement of Iceland has not been matched by corresponding progress in the political arena. For most of the 20th century, Iceland was governed by shifting coalitions of four political parties, whose candidates were elected to parliament based on an electoral system that gave rural areas substantial overrepresentation in the legislature. As a result, agrarian interests have held considerably more influence in Iceland than in other Nordic countries. This bias is in part responsible for delays in legislative reforms aimed at enhancing efficiency in agriculture, the fisheries, banking and finance, and other areas. It also helps explain why Iceland, nearly alone in Europe, has expressed little interest in joining the European Union (EU), even though EU member nations constitute Iceland’s most important trading partners.

Environmental issues appear to increasingly concern Icelandic voters. Although Iceland’s economy has been invigorated in recent years by the growth of an aluminum smelting industry, voters in the May 2007 parliamentary elections sent a cautionary note about the possible environmental impact of the industry. Voters punished the Progressive Party, which advocated the continued building of smelters by foreign aluminum companies such as ALCOA, while electing Social Democrats and Left Greens, who called for a halt in construction while environmental impact studies are performed.