Changes

Iceland's territory was augmented by the emergence of the island of [[Surtsey]] from beneath the waves in the years 1963-67, following submarine volcanic eruptions. The island is subject to erosion, and now occupies .54 square miles (1.4 km²), about half its area in 1967.

Iceland's territory was augmented by the emergence of the island of [[Surtsey]] from beneath the waves in the years 1963-67, following submarine volcanic eruptions. The island is subject to erosion, and now occupies .54 square miles (1.4 km²), about half its area in 1967.

*Area: 103,000 sq. km. (39,600 sq. mi.); about the size of Virginia or slightly larger than Ireland.

*Area: 103,000 km². (39,600 sq. mi.); about the size of Virginia or slightly larger than Ireland.

*Cities: Capital—Reykjavík (pop. 117,898). Other towns—Kópavogur (28,665), Hafnarfjörður (24,895), Akureyri (17,278).  

*Cities: Capital—Reykjavík (pop. 117,898). Other towns—Kópavogur (28,665), Hafnarfjörður (24,895), Akureyri (17,278).  

*Terrain: Rugged.  

*Terrain: Rugged.  

Iceland's economy was historically prone to inflation due to periods of rapid growth and its dependence on a few key export sectors, such as fish, which could fluctuate significantly in quantity and price from one year to the next. For example, inflation exceeded 43% in 1974 and 59% in 1980, before falling to 15% in 1987, and then rising to 30% in 1988, which resulted in devaluations of the krona. In the 1990s and continuing until 2006, Iceland experienced several years of strong economic growth, thanks to economic reforms, deregulation, and low inflation, averaging around 4%. The economy suffered a setback in spring 2006 when credit rating agencies and other international financial firms released a number of reports raising questions about the activities and stability of Iceland's major banks and the state of the Icelandic economy. These reports were widely covered in the international financial press, causing a marked drop in the value of shares listed on the Icelandic stock exchange and of the Icelandic krona. The market recovered as reforms were made in the banking sector. The financial sector was hit hard by the global credit crisis beginning in 2007. Although Icelandic banks had limited sub-prime mortgage market exposure, they were affected by the general lack of available capital. In the first six months of 2008, the Icelandic krona was devalued by 30% and inflation rose to nearly 12%. Because of Iceland's high current account deficit, high inflation, and high private sector debt levels, the global financial community and the foreign media closely monitored the situation. In turn, the Icelandic Government has carefully followed foreign confidence in the Icelandic economy because access to foreign capital, which Icelandic business people have used aggressively in overseas investments, is extremely important. Wealthy Icelanders have heavily invested in the retail and real estate markets in Denmark and the U.K. and telecom, pharmaceutical, banking, and financial sectors in Eastern Europe. Their success, beginning in the late 1990s, created for the first time a "super-rich" elite in Icelandic society.  

Iceland's economy was historically prone to inflation due to periods of rapid growth and its dependence on a few key export sectors, such as fish, which could fluctuate significantly in quantity and price from one year to the next. For example, inflation exceeded 43% in 1974 and 59% in 1980, before falling to 15% in 1987, and then rising to 30% in 1988, which resulted in devaluations of the krona. In the 1990s and continuing until 2006, Iceland experienced several years of strong economic growth, thanks to economic reforms, deregulation, and low inflation, averaging around 4%. The economy suffered a setback in spring 2006 when credit rating agencies and other international financial firms released a number of reports raising questions about the activities and stability of Iceland's major banks and the state of the Icelandic economy. These reports were widely covered in the international financial press, causing a marked drop in the value of shares listed on the Icelandic stock exchange and of the Icelandic krona. The market recovered as reforms were made in the banking sector. The financial sector was hit hard by the global credit crisis beginning in 2007. Although Icelandic banks had limited sub-prime mortgage market exposure, they were affected by the general lack of available capital. In the first six months of 2008, the Icelandic krona was devalued by 30% and inflation rose to nearly 12%. Because of Iceland's high current account deficit, high inflation, and high private sector debt levels, the global financial community and the foreign media closely monitored the situation. In turn, the Icelandic Government has carefully followed foreign confidence in the Icelandic economy because access to foreign capital, which Icelandic business people have used aggressively in overseas investments, is extremely important. Wealthy Icelanders have heavily invested in the retail and real estate markets in Denmark and the U.K. and telecom, pharmaceutical, banking, and financial sectors in Eastern Europe. Their success, beginning in the late 1990s, created for the first time a "super-rich" elite in Icelandic society.  

Iceland has few proven mineral resources, but has abundant hydroelectric and geothermal energy resources. These clean energy sources provide for nearly 100% of electricity generation and home heating. Iceland's energy resources support power-intensive export industries, such as aluminum smelting. The Kárahnjúkar hydroelectric project is the largest single electrical station in the country, with capacity of 690 megawatts (mw). Other major hydroelectric stations include Búrfell (270 mw), Hrauneyjarfoss (210 mw), Sigalda (150 mw), and Blanda (150 mw). Iceland-based Nordural Aluminum is a wholly owned investment of Century Aluminum of Monterey, California. The plant employs more than 450 people and recently expanded its production capacity to 220,000 tons per year. A new smelter owned by Alcoa, another U.S.-owned aluminum company, began operations in June 2007 and will have a production capacity of 346,000 tons per year when fully operational. The Kárahnjúkar hydroelectric power plant, completed in early 2007, was built to provide power to the Alcoa smelter. Over $2 billion was invested to build the power plant and smelter, making the combined project the largest in Icelandic history.  

Iceland has few proven mineral resources, but has abundant hydroelectric and geothermal energy resources. These clean energy sources provide for nearly 100% of electricity generation and home heating. Iceland's energy resources support power-intensive export industries, such as aluminum smelting. The Kárahnjúkar hydroelectric project is the largest single electrical station in the country, with capacity of 690 megawatts (mw). Other major hydroelectric stations include Búrfell (270 mW), Hrauneyjarfoss (210 mW), Sigalda (150 mW), and Blanda (150 mW). Iceland-based Nordural Aluminum is a wholly owned investment of Century Aluminum of Monterey, California. The plant employs more than 450 people and recently expanded its production capacity to 220,000 tons per year. A new smelter owned by Alcoa, another U.S.-owned aluminum company, began operations in June 2007 and will have a production capacity of 346,000 tons per year when fully operational. The Kárahnjúkar hydroelectric power plant, completed in early 2007, was built to provide power to the Alcoa smelter. Over $2 billion was invested to build the power plant and smelter, making the combined project the largest in Icelandic history.  

Iceland has no railroads. Organized road building began about 1900 and has greatly expanded in the past decade. The current national road system connects most of the population centers along the coastal areas and consists of about 13,000 kilometers (8,125 mi.) of roads, of which about 4,800 kilometers (2,982 mi.) are paved. Regular air and sea service connects Reykjavík with the other main population centers.  

Iceland has no railroads. Organized road building began about 1900 and has greatly expanded in the past decade. The current national road system connects most of the population centers along the coastal areas and consists of about 13,000 kilometers (8,125 mi.) of roads, of which about 4,800 kilometers (2,982 mi.) are paved. Regular air and sea service connects Reykjavík with the other main population centers.