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A Nordic country which, despite its small population and its inhospitable climate, has succeeded in achieving a remarkably high standard of living.

Danish rule (up to 1944)

Under Danish sovereignty since 1380, Europe's second largest island acquired limited autonomy from Denmark in 1874, when its Assembly, the Althing, gained legislative powers. Moves to achieve independence were finally successful in 1918, when Iceland gained full sovereignty, though its head of state continued to be linked to the Danish crown. Owing to its important strategic location, during World War II Iceland was occupied by British and US troops in 1940 and 1941 respectively. Taking advantage of the German occupation of Denmark at the time, Iceland severed its ties with the Danish King in 1944, when it was declared a Republic, with Sven Björnsson becoming the first President (1944–52).

Contemporary history (1944–2000)

After World War II, it became an important base for NATO, which it joined in 1949. Traditionally, its economy depended on fisheries, which accounted for around 80 per cent of its exports. As its coastal waters became exploited by foreign fishing fleets, it gradually extended its fishing limits, up to 200 miles around the island. This led to a series of Cod Wars, culminating in the temporary breakdown of diplomatic relations with the UK in 1976. In 1980 Vígdis Finnbogadóttir (b. 1930) was elected the first woman President. In the early 1990s, fishing quotas had to be reduced to prevent further decline in fishing stocks. This led to substantial underemployment among its fishermen, and caused a period of economic stagnation which was not overcome until the end of the decade.

Contemporary politics (since 2000)

Iceland's reliance on fishing, which accounted for over 70 per cent of its exports in 2001, has been the main stumbling block in repeated negotiations about membership of the European Union. Despite its lack of formal membership, however, from 1997 it enjoyed virtual free trade with the European Union. In 2001 it entered the Schengen Agreement.

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