Iceland Essay

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Iceland is an island in the North Atlantic, divided into eight regions by geographical orientation and/ or geographical characteristic, e.g., the Southwest Peninsula, all of which add up to an area of approximately 102,819 sq. km (39,698 sq. mi.). Its capital is Reykjavik (pronounced “rake-a-vik”). The climate is a cool temperate oceanic, but it is changeable and mild because of the Gulf Stream and southwest winds. The present constitution came into force on June 17, 1994, and has been amended four times since, with the most recent amendment on June 24, 1999. The parliament (Alpingi) is elected in accordance with the electoral law of 1999, which provides an Alpingi of 63 members. The current president (a largely ceremonial office) is Olafur Rafnar Grimsson, who was reelected in 2004 by a direct popular vote.

The current prime minister is Geir Hilmar Haarde, who promised to reduce inflation, confirmed Iceland’s contribution to peacekeeping forces in Afghanistan, and reasserted the aim to secure a seat on the United Nations Security Council in 2008. However, Iceland possesses no armed forces, since under NATO, U.S. forces were stationed in Iceland as the Iceland Defense Force until an agreement was signed in September 2006, withdrawing all U.S. forces from the island.

Iceland is a member of over 10 organizations such as the World Trade Organization, the Council of Europe, and the European Free Trade Association. The economy has grown since the mid-1990s as a result of privatization and deregulation. Per capita income has doubled over the last two decades, and in 2005, gross domestic product per capita was US$54,427. The growing economy spurred Iceland’s aim to become the world’s first “hydrogen economy,” which it initiated by converting its buses into fuel cell–powered vehicles in 2003. Iceland intends to run all its transport and fishing fleet on hydrogen produced on the island.

Fishing is vital to Iceland’s economy. The per capita consumption of fish and fishery products is the second highest in the world, after the Maldives. Iceland’s main imports in 2005 were industrial supplies, transport equipment, fuels and lubricants, and food and beverages. Its main exports in the same year were fish, crustaceans, mollusks, mineral and chemical products, health care and toilet articles, and transport equipment.

Corruption is very limited in Iceland; it is generally considered one of the least corrupt nations in the world. There are three levels of courts in Iceland: district, appellate, and the supreme court, which has eight judges. The justices elect the chief justice for a period of two years. The penal population in September 2005 was 40 per 100,000 of the national population.

Primary education is compulsory and free from 6 to 15 years of age. Optional secondary education from 16 to 19 is also free. The adult literacy rate is at least 99 percent. Iceland has one of the lowest alcohol consumption rates in Europe. The national church is the Evangelical Lutheran, which is endowed by the state. There is one World Heritage Site in Pingvellir National Park, located on an active volcano. The Reykjavik Arts Festival is held every May–June, which features international artists and performers. Iceland publishes more books per person than any other country in the world. There were 258,000 internet users in 2005, or 88 percent of the total population, which is the highest percentage in the world.

Overall, literacy, longevity, income, and social cohesion are on par with world standards. In fact, Iceland is rated number one on high human development by the United Nations Development Programme and life expectancy is third in the world at 81.5 years.

Iceland became independent on June 17, 1944. Long before independence, Iceland was settled in 874 by Ingólfir Arnarson, who came from Norway to where Reykjavik is today. Most of the 400 migrants who followed him arrived from other Nordic countries and from Norse settlements located in the British Isles. In 930, the first-ever democratic national assembly, the Alpingi, was established. In 1000, Christianity was adopted as the island’s official religion. Iceland’s only indigenous wood, birch wood, which was in abundance, was valuable in making charcoal. However, in the 14th century birch wood became depleted and this, combined with soil erosion, led to a halt in crop growth. In the 15th century, the Black Death expanded to Iceland on two occasions, killing half the population. Iceland was independent for over 300 years before it was ruled by Norway and Denmark. In 1875, the Askja volcano erupted and damaged the Icelandic economy to the point of widespread famine. Shortly after, 20 percent of the island’s population emigrated, mostly to Canada and the United States.

Economic Crisis

Iceland was an early victim of the global financial crisis as its currency plunged and its financial system all but collapsed in October 2008. This was mainly caused by the billions of dollars of foreign debts incurred by its banks. Iceland’s banking system had collapsed as a culmination of a series of decisions the banks made that left them highly exposed to disruptions in financial markets. The top three commercial banks were ultimately nationalized.

On November 19, 2008, Iceland and the International Monetary Fund (IMF) finalized an agreement on a $6 billion economic stabilization program supported by a $2.1 billion loan from the IMF. Following the IMF decision, Denmark, Finland, Norway, and Sweden agreed to provide an additional $2.5 billion. New laws have been passed and restructuring of the financial system implemented to prevent a recurrence.

The economic meltdown had a devastating effect on the Icelandic economy. External debt increased threefold from being one of the lowest in the world and unemployment and inflation are affecting people’s lives. The government feels, however, that the foundation of Iceland’s economy remains strong and its clean energy, marine resources, strong infrastructure, and well-educated workforce provide a firm basis to overcome these severe economic difficulties.


  1. CIA, “Iceland,” World Factbook, (cited March 2009);
  2. Doing Business and Investing in Iceland Guide (International Business Publications USA, 2007);
  3. The Europa World Year Book 2008 (Routledge, 2006);
  4. Olafur Th. Hardarson and Gunnar Helgi Kristinsson, “Iceland,” European Journal of Political Research (v.46/7–8, 2007)
  5. ; Robert Tchaidze, Anthony Annett, and Li Lian Ong, Iceland: Selected Issues (International Monetary Fund, 2007);
  6. Barry Turner, ed., The Statesman’s Yearbook 2008 (Palgrave Macmillan, 2008);
  7. Kevin Watkins, Human Development Report 2007/2008 (United Nations Human Development Programme, 2007).

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