The Icelandic population (276,000 residents according to a 1998 estimate) has a relatively high annual growth rate (9 ‰), the highest in the Nordic countries. The 58 % of the population is concentrated in a small area compared to the extension of the island, Höfudborgaravaedi, which includes the capital Reykjavik (about 100,000 pop.), The other two major urban centers in Iceland, Kópavogur and Hafnarfjördur (both 18. 000 residents) and the town of Keflavik, where the international airport is located, which was upgraded in 1983and later expanded. The attraction of the coasts, especially the south-western ones, continues to exert a significant weight on the scarce population of the interior which, mountainous and frozen, is largely devoid of residents. The considered urban population is 92 %, because the extension of cultivated land (0, 06 % of the total area) and then the settlements to small groups or scattered is very small, more widespread while livestock, mostly sheep, extensive on large surfaces.
Economic conditions and environmental problems
Fishing, which remains the country’s major economic resource, the growing tourist influx, relations with the European Union (after the entry of the major Nordic countries) and the exploitation of geothermal energy are the current and near future themes for the Iceland. The use of geothermal energy is recommended by international environmental organizations as a natural renewable and non-polluting source of heat; in this field the Iceland occupies a pioneering position as approximately 7 % of the electricity is produced by geothermal power plants.
The Krafka plant, with a capacity of 60 MW, is one of the largest. For heating the Iceland it also uses hot springs, shower heads and geysers. Much of the remaining electricity is water, so that it does not aggravate the foreign trade balance. This is mainly based on fish (on average 2 million tonnes per year) and derivatives, processed in some industrial plants. The use of natural hot water and boiling steam also remains widespread in the capital, Reykjavik, with thousands of wells dug in private properties for this purpose.
The diversification of economic activities is not a simple problem due to the scarcity of raw materials and the conditions of the natural environment; however tourism appears to be expanding, at least in relation to the number of residents (232,220 visitors in 1998), attracted by volcanism, glaciers, grandiose and uncontaminated natural environments and also by particular historical and ethnic traditions, which are better preserved than in other Nordic countries because of the isolation. Fur farming is expanding.
Since 1970, marine biology research had signaled the possibility, which subsequently occurred, of a rapid decrease in the number and size of cod and herring, due to intense exploitation. Agreements with some large global frozen fish distribution companies have led, following the increase in demand, to specialization in cod fishing. Trade within the Nordic Council states, and especially with Norway, Denmark and Sweden, allows for supplies at preferential prices of some products of which Iceland in short supply, such as oil (from Norway) and timber (from Sweden).
The country always remains a natural research laboratory of great importance as regards the study of earthquakes and volcanic phenomena, being located astride one of the largest fractures on the planet, the mid-Atlantic ridge. The 9 % of Iceland’s territory is protected and divided into twenty natural parks.
Economic and financial difficulties have made the successive governments of the country unstable since the postwar period. An improvement took place in the second half of the 1980s, with a sharp decline in the inflation rate (12 % in 1986 compared to 87 % in 1983) and the achievement of balanced trade balance in 1989. The question of fishing rights is always very relevant, due to its consequences on the domestic and above all international level: only with a series of agreements reached in the second half of the seventies and in the first half of the following decade have the relations of Iceland with Denmark, Norway and Great Britain.
In office since 1991, the government of D. Oddsson, made up of members of the Social Democratic Party and the Independence Party, remained at the helm of the Iceland until the political consultations which took place in April 1995. The lowering of the inflation rate (2 % in 1995) and the increase in exports influenced the outcome of the elections and, in particular, the result of the independence party whose leader was Oddsson: while the Social Democrats went down from the 15th, 5 % of the votes obtained in 1991 to 11.4 % and from 10 to 7 seats, the separatists kept 25 deputies and 37.1 % of the votes, slightly less than in previous consultations, when they had reached 38.6 % of the votes and 26 seats. Ally of the separatists in the new Oddsson government, center-right, which arose in the same month of April, was therefore the Progressive Party, which went from 18.9 % to 23 % of the votes and from 13 to 15 seats (People’s Alliance obtained on 14, 3 % of the votes and confirmed the 9 deputies of the previous legislature).
On an international level, in the first half of the 1990s, disputes with Denmark (concerning an area of the Barents Sea) and with Norway (relating, instead, to a marine surface including between Iceland itself and Greenland). Starting from 1994, the year in which the Iceland it also became part of the European Economic Area, there was a reduction in the presence of NATO on Icelandic territory, which in 1985 had been declared nuclear-free territory by Parliament.
In June 1996 the exponent of the People’s Alliance and candidate of the left OR Grimsson was elected President of the Republic and took over from Mrs. V. Finnbogadóttir, in office since 1980. The political elections of May 1999 confirmed Oddsson’s popularity: his party obtained 40.8 % of the votes and 26 seats against 26.8 % of the votes and 17 seats in the center-left coalition (Social Democrats, Alliance of the people, Alliance of women) formed in view of the consultations. The Progressive Party, which obtained 18.4 % of the votes and 12 seats, fell.