Iceland is an island in the North Atlantic Ocean, on the borders of the temperate and the Arctic zones, with its extreme northern point touching the Arctic Circle. Its nearest neighbour to the west is Greenland, at a distance of 278 km. Some 420 km to the Southeast lie the Faroe Islands. The Gulf Stream sends one of its branches northwards to the western shores of Iceland, bringing warmth which makes Iceland inhabitable.

 

Iceland was settled from Norway and by Norse settlers from the British Isles in the 9th and the 10th centuries. They had no formal ties with any other state during the first two and a half centuries after the settlement, but in 1262-64 the inhabitants swore allegiance to the Norwegian crown. In 1383, the Danish and Norwegian crowns were united and Iceland was thereafter part of the kingdom of Denmark and remained under Danish rule until the 20th century. In 1918, Iceland was declared a sovereign state in personal union with Denmark. On June 1944, Iceland was declared an independent republic.

 

Iceland's total area is approximately 103,000 km2 of which only 23% is arable land. As of December the 1st 1999 the population of Iceland was 278.702 with a population density of 2.5 inhabitants per km2. The population is homogeneous, being almost entirely descended from the Norse settlers of the 9th century, although there has been some immigration from other areas, especially in recent years.

 

Icelandic is the native tongue of Iceland. It belongs, along with Norwegian and Faroes, to the West Scandinavian branch of the North Germanic family of languages. In compulsory education children learn a Scandinavian language (usually Danish) and English, and those who carry on into upper secondary education add at least a third language, usually German or French.

 

A free-market economy may now be said to predominate in Iceland. One of the greatest problems in Icelandic economic life in the 1970s and '80s was a rampant inflation; this period also saw, however, a steady increase in the gross national product (GNP). As in much of the rest of Europe this trend concerning inflation has now been reversed. In the last few years the rate of inflation has been kept under control, and is now among the lowest in Europe (less than 2%).

 

The fishing industry accounts for approximately one-seventh of the GNP and employs about one-eighth of the workforce. At the same time, however, about three-quarters of all export in recent years have been fish products. Concern over declining fishing stocks has resulted in the introduction of a quota system, in which the quantity of a given fish which may be legally caught by any single vessel is strictly monitored. Apart from fish, Iceland's most significant resource is its vast natural energy potential, both as regards water power and geothermal power. As of April the 1st 2000 1.9% of the work force was unemployed. Even if until recently the demand for labour most of the time did not meet the supply, there has always been a tendency toward seasonal unemployment, especially in the fishing industry. In 1987 unemployment reached an all time low of less than 0.4%.