Iceland Geopolitics

Iceland is a North European island state. Since 1944, the year of independence from Denmark, the political scene has been dominated by the center-right independence party. This continuity was interrupted only in recent years, when, following the financial collapse that overwhelmed the Icelandic system in 2008, the party lost its traditional popular support to the center-left opposition, which won the victory in the 2009 elections. The coalition made up of the Social Democratic Alliance and the Left Green Movement, however, did not manage to snatch a second mandate from the consolidated independence party which, in coalition with the Progressive Party, won 38 of the 63 parliamentary seats in the elections of 27 April 2013.

In the European context, Iceland has one of the smallest economies in absolute terms. In the last twenty years, however, it has been the protagonist of an amazing economic growth supported by huge international investments, which has led it to reach one of the highest per capita GDP in the world. The Icelandic dream, however, did not last long: from the end of 2008, both due to the island’s vulnerability to the international financial storm and the strong exposure of the national banking system, the country entered an unprecedented economic crisis. The three largest Icelandic credit institutions – including Landsbanki, responsible for a diplomatic dispute known as the ‘Icesave dispute’,foreign assets. The result is the accumulation of an overall debt estimated at between six and ten times the amount of Iceland’s GDP in 2008.

The economic crisis has also affected international relations, making them more complex. The dispute with the UK and the Netherlands only reached a turning point in January 2013, when a European Free Trade Association (EFTA) court ruling ruled that Iceland must pay ‘Icesave’ depositors equal compensation. only at the deposit insurance threshold, which was in force in the two countries at the time of the crash. The EU directive, issued the following year and invoked by the injured parties, would therefore not apply, according to which in the event of a bank default, depositors are compensated up to a maximum amount of 100,000 euros. According to these new EFTA provisions, Iceland appears to have already paid 90% of its debt.

The effect of the crisis prompted Reykjavík to formally request access to the European Union (July 2009), but the project met with dissent from a large part of the electorate and in May 2013 the negotiations were suspended pending a popular referendum..

As for natural resources, Iceland has a state-of-the-art geothermal energy production. The island uses this source to heat 85% of its homes and is therefore the nation that covers the highest share of internal energy needs with geothermal.

Iceland is the only NATO member not to have a standing army. After more than 50 years during which it was the United States that provided the defense of the state, maintaining a base there, Iceland has only taken on its own security since 2006.

Iceland Geopolitics