The Republic of Iceland

[Olafur R Grimsson]

Basic Info:

Located on the Mid-Atlantic Ridge, Iceland is volcanically and geologically active on a large scale; this defines the landscape. The interior mainly consists of a plateau characterised by sand fields, mountains and glaciers, while many big glacial rivers flow to the sea through the lowlands. Warmed by the Gulf Stream, Iceland has a temperate climate relative to its latitude and provides a habitable environment and nature.

According to Landnámabók, the settlement of Iceland began in 874 when the Norwegian chieftain Ingólfur Arnarson became the first permanent Norwegian settler on the island. Others had visited the island earlier and stayed over winter. Over the next centuries, people of Nordic origin settled in Iceland. Until the 20th century, the Icelandic population relied on fisheries and agriculture, and was from 1262 to 1918 a part of the Norwegian, and later the Danish monarchies. In the 20th century, Iceland's economy and welfare system developed quickly. In recent decades, Iceland has implemented free trade in the European Economic Area and diversified from fishing to new economic fields in services, finance and various industries.

Today, Iceland has some of the world's highest levels of economic and civil freedoms. In 2007, Iceland was ranked as the most developed country in the world by the United Nations' Human Development Index. It was also the fourth most productive country per capita, and one of the most egalitarian, as rated by the Gini coefficient. Icelanders have a rich culture and heritage, such as cuisine and poetry and the medieval Icelandic Sagas are internationally renowned. Iceland is a member of the UN, NATO, EFTA, EEA, UEFA, and OECD. Iceland is the sole partner of the Faroe Islands signatory to the Hoyvík Agreement.

Iceland has been especially badly affected by the current world financial crisis. The nation's ongoing economic crisis has caused significant unrest and made Iceland the first western country to borrow from the International Monetary Fund since 1976. In February 2009 a minority government took office, headed by Jóhanna Sigurðardóttir, the world's first openly gay head of government in modern times.

Government:

Iceland has a left-right multi-party system. The biggest parties are the Social Democratic Alliance (Samfylkingin), the right wing Independence Party (Sjálfstæðisflokkurinn) and the Left-Green Movement (Vinstrihreyfingin - grænt framboð). Other political parties with seats in Althing are the centrist Progressive Party (Framsóknarflokkurinn) and the Citizens' Movement (Borgarahreyfingin). Many other parties exist on the municipal level, most of which only run locally in a single municipality.

Iceland is a representative democracy and a parliamentary republic. The modern parliament, called "Alþingi" (English: Althing), was founded in 1845 as an advisory body to the Danish monarch. It was widely seen as a re-establishment of the assembly founded in 930 in the Commonwealth period and suspended in 1799. Consequently, "it is arguably the world's oldest parliamentary democracy." It currently has 63 members, elected for a four year term.

The president of Iceland is a largely ceremonial head of state and serves as a diplomat but can block a law voted by the parliament and put it to a national referendum. The current president is Ólafur Ragnar Grímsson. The head of government is the prime minister, Jóhanna Sigurðardóttir, who, together with the cabinet, is responsible for executive government. The cabinet is appointed by the president after a general election to Althing; however, the appointment is usually negotiated by the leaders of the political parties, who decide among themselves after discussions which parties can form the cabinet and how its seats are to be distributed, under the condition that it has a majority support in Althing. Only when the party leaders are unable to reach a conclusion by themselves in a reasonable time does the president exercise this power and appoint the cabinet himself or herself. This has not happened since the republic was founded in 1944, but in 1942 the regent of the country (Sveinn Björnsson who had been installed in that position by the Althing in 1941) did appoint a non-parliamentary government. The regent had, for all practical purposes, the position of a president, and Sveinn in fact became the country's first president in 1944.

Pride in Politics:

Iceland prides itself on being the first country to recognize the regained independence of Lithuania, Latvia and Estonia from the USSR in 1990-1991. Similarly, it was the first country to recognize Montenegro's independence from its former union with Serbia. Iceland also is the greatest Nordic contributor per capita to NATO-led troops in Bosnia and Kosovo, to police in Bosnia, and to Bosnia/Kosovo reconstruction, resettlement, and relief.

Iceland maintains diplomatic and commercial relations with practically all nations, but its ties with Norway and other Nordic states, Germany, with the US, and with the other NATO nations are particularly close. Icelanders remain especially proud of the role Iceland played in hosting the historic 1986 Reagan-Gorbachev summit in Reykjavík, which set the stage for the end of the Cold War.

2008-2009 economic crisis

Iceland is especially hard hit by the ongoing late 2000s recession, because of the fall of its banking system and a subsequent economic crisis. Before the crash of the three largest banks in Iceland, Glitnir, Landsbanki and Kaupthing, their combined debt exceeded approximately six times the nation's gross domestic product of €14 billion ($19 billion). In October 2008, the Icelandic parliament passed emergency legislation to minimize the impact of the financial crisis. The Financial Supervisory Authority of Iceland used permission granted by the emergency legislation to take over the domestic operations of the three largest banks. Icelandic officials, including central bank governor Davíð Oddsson, stated that the state did not intend to take over any of the banks' foreign debts or assets. Instead, new banks were established around the domestic operations of the banks, and the old banks will be run into bankruptcy. The Icelandic economic crisis has been a matter of great concern in international media.

On 28 October, 2008, the Icelandic government raised interest rates to 18%, a move which was forced in part by the terms of acquiring a loan from the IMF. After the rate hike, trading on the Icelandic króna finally resumed on the open market, with valuation at around 250 ISK per Euro, less than one-third the value of the 1:70 exchange rate during most of 2008, and a significant drop from the 1:150 exchange ratio of the week before. Iceland has appealed to Nordic countries for an additional €4 billion in aid to avert the continuing crisis.

On 26 January, 2009, the coalition government collapsed due to the public dissent over the handling of the financial crisis. A new left-wing government was formed a week later and immediately set about removing Central Bank governor Davíð Oddsson and his aides from the bank through changes in law. Oddsson was removed on 26 February, 2009

Currency issues

Iceland is not a member of the European Union and does not use the euro.

The Icelandic currency is a low-volume world currency, strongly managed by its central bank, with a high degree of volatility not only against the US and Canadian dollars, but also against the currencies of the other Nordic countries (Swedish krona, Norwegian krone and Danish krone) and the euro. For example, during the first half of 2006, the Icelandic króna ranged between 50 and 80 per US$. Prior to the currency's collapse in October 2008, the króna was considered overvalued; in July 2008, a Big Mac cost the equivalent of nearly six U.S. dollars, versus $3.57 in the USA.

Tourists to Iceland will generally not need to carry much Icelandic currency, as in most cases electronic payment is accepted. Other currencies are very rarely accepted in Iceland. A notable exception is Keflavík International Airport (which has many transfer passengers), where the US dollar, euro and some other currencies are accepted by all merchants. Certain stores in downtown Reykjavík, accept some foreign currencies.

The overall level of technological sophistication is noteworthy in Iceland. Iceland has, for example, among the highest per capita computer usage in the world (far higher than the UK or USA). The saturation of technology in Iceland has had ramifications in their monetary system; a very large percentage of all transactions in Iceland take place through electronic forms of payment, such as debit and credit cards and online bank transfers. It is also worth noting that the value of banknotes is relatively small, e.g. the largest denomination banknote is the 5000 króna note, while a mid-range dinner for two in Iceland, without drinks or dessert, can easily exceed 5000 krónur (ca. EUR 30 as of December 2008). This effect may accelerate the Icelandic move towards a semi-cashless economy.

2008 financial crisis (Currency wise)

In October 2008, the effects of the 2007/08 global financial crisis brought about a collapse of the Icelandic banking sector. The value of the króna plummeted, and on 7 October 2008 the Icelandic Central Bank attempted to peg the króna at 131 against the euro. This peg was abandoned the next day. The króna later fell to 340 against the euro before trade in the currency was suspended (by comparison, the rate at the start of 2008 was about 90 krónur to the euro). After a period of tentative, very low-volume international trading in the króna, activity had been expected to pick up again throughout November 2008, albeit still with low liquidity, as Iceland secured an IMF loan. However as of January 2009 the krona was still not being traded regularly, with the ECB reference rate being set only intermittently, the last time on December 3, 2008 at 290 ISK per euro.

The Icelandic krona similarly fell in value against the US dollar, from ca. 50 to 80 per dollar to about 110-115 per dollar; by mid-November 2008 it had continued its slide to ca. 135 to the dollar. As of April 2, 2009, the value is somewhere around 119 per US dollar. The previously high costs for foreign tourists have thereby been reduced, which Iceland's tourism industry hopes to exploit.

My Goal:

Save Iceland from the financial crisis and make us reach our real population.

Edited May 25, 2009 by Olafur R Grimsson

[Voodoo Nova]

Very well written factbook. If you plan on using Iceland on the map, come talk to someone in the Nordland Reich and we'll talk about it.

[Olafur R Grimsson]

This just in:

Today the Icelandic Parliament just passed a bill at 11:20PM that will raise car fees by 10%, Tobacco and Alcohol by 15% and 8cents on every liter of gasoline. This passed with 32 votes against 22.

Gasoline is expected to cost: $1,35 a liter ($5.1 a Gallon)

Pack of Malboro will now cost around $6.60

And lets not even start on the booze.

These changes have received nothing but criticism from the people of the nation but the Financial Minister said this was unpreventable.

This is the new government's first act against the economic crisis since it started working in April 23rd. and by the looks if things its about to get a whole lot worse.

[Olafur R Grimsson]

Today The Republic Iceland agreed to take a loan to pay back the Icesave holders their money that they had stored in the online bank. Icesave closed back in October when Landsbankinn went bankrupt but it was an online bank opened to some European countries.

The loan as 5.5% interest rates and totals of 640 trillion Icelandic Crowns or 640.000.000.000 ISK in digits. Iceland wont start paying back the loan until 2016.

The people of the country say this is the governments way to suck up the big countries to get better recommendations when Iceland will apply to join the European Union.

Gas is now $1,44 a liter ($5.4 a gallon)

Pack of Malboro is $6,72

These are confirmed prices.

Edited June 5, 2009 by Olafur R Grimsson