Iceland is a Nordic island country between the North Atlantic and the Arctic Ocean. It has a population of 329,100 and an area of 103,000 km2 (40,000 sq mi), giving the island the lowest population density of any country in Europe. The capital and largest city is Reykjavík. Reykjavík and the surrounding areas in the southwest of the country are home to over two-thirds of the population. Iceland is volcanically and geologically active. The interior consists of a plateau characterised by sand and lava fields, mountains and glaciers, while many glacial rivers flow to the sea through the lowlands. Iceland is warmed by the Gulf Stream and has a temperate climate, despite a high latitude just outside the Arctic Circle.
Iceland is known as the home of the first Viking explorers of North America, in the year 986. Its inhabitants are descended from Norse and some Celtic (mainly Irish and Scottish) peoples [mainly slaves and wives of the Norse men]; ancestors. Currently, they also include some other arrivals from Europe.
According to Landnámabók, the settlement of Iceland began in 874 CE when the Norwegian chieftain Ingólfur Arnarson became the first permanent settler on the island. In the following centuries, Scandinavians settled Iceland, bringing with them thralls of Gaelic origin. From 1262 to 1918, Iceland was ruled by Norway and later Denmark. The country became independent in 1918 and a republic in 1944.
Until the 20th century, Iceland relied largely on fishing and agriculture. Industrialisation of the fisheries and Marshall Plan aid following World War II brought prosperity and Iceland became one of the wealthiest and most developed nations in the world. In 1994, Iceland became party to the European Economic Area, which supported diversification into economic and financial services.
Affected by the ongoing worldwide financial crisis, the nation’s entire banking system systemically failed in October 2008, leading to a severe depression, substantial political unrest, the Icesave dispute, and the institution of capital controls. The economy has since made a significant recovery, in large part due to a surge in tourism.
Except for the capital controls, Iceland generally has a free-market economy with relatively low taxes compared to other OECD countries. It maintains a Nordic social welfare system that provides universal health care and tertiary education for its citizens. Iceland ranks highly in economic, political and social stability and equality. In 2013, it was ranked as the 13th most-developed country in the world by the United Nations’ Human Development Index. Iceland runs almost completely on renewable energy.
Icelandic culture is founded upon the nation’s Scandinavian heritage. Most Icelanders are descendants of Germanic and Gaelic (Celtic) settlers. Icelandic, a North Germanic language, is descended from Old Norse and is closely related to Faroese and West Norwegian dialects. The country’s cultural heritage includes traditional Icelandic cuisine, Icelandic literature and medieval sagas. Iceland has the smallest population of any NATO member and is the only one with no standing army, its lightly armed coast guard being in charge of defence.