page_title: History of Iceland
section_title: EEA membership and economic reform
hierarchical_section_title: History of Iceland / Republic of Iceland (1944–) / EEA membership and economic reform
context_page_description: The recorded history of Iceland began with the settlement by Viking explorers and their slaves from the east, particularly Norway and the British Isles, in the late ninth century. Iceland was still uninhabited long after the rest of Western Europe had been settled. Recorded settlement has conventionally been dated back to 874, although archaeological evidence indicates Gaelic monks from Ireland, known as papar according to sagas, had settled Iceland before that date.
  The land was settled quickly, mainly by Norwegians who may have been fleeing conflict or seeking new land to farm. By 930, the chieftains had established a form of governance, the Althing, making it one of the world's oldest parliaments. Towards the end of the tenth century, Christianity came to Iceland through the influence of the Norwegian king Olaf Tryggvason. During this time, Iceland remained independent, a period known as the Old Commonwealth, and Icelandic historians began to document the nation's history in books referred to as sagas of Icelanders.
context_section_description: In 1991, the Independence Party, led by Davíð Oddsson, formed a coalition government with the Social Democrats. This government set in motion market liberalisation policies, privatising a number of state-owned companies.  Iceland then became a member of the European Economic Area in 1994. Economic stability increased and previously chronic inflation was drastically reduced.
  In 1995, the Independence Party formed a coalition government with the Progressive Party. This government continued with free market policies, privatising two commercial banks and the state-owned telecom Landssíminn. Corporate income tax was reduced to 18% (from around 50% at the beginning of the decade), inheritance tax was greatly reduced, and the net wealth tax was abolished. A system of individual transferable quotas in the Icelandic fisheries, first introduced in the late 1970s, was further developed.
  The coalition government remained in power through elections in 1999 and 2003. In 2004, Davíð Oddsson stepped down as Prime Minister after 13 years in office. Halldór Ásgrímsson, leader of the Progressive Party, took over as prime minister from 2004 to 2006, followed by Geir H. Haarde, Davíð Oddsson's successor as leader of the Independence Party.
  Following a recession in the early 1990s, economic growth was considerable, averaging about 4% per year from 1994. The governments of the 1990s and 2000s adhered to a staunch but domestically controversial pro-U.S. foreign policy, lending nominal support to the NATO action in the Kosovo War and signing up as a member of the Coalition of the willing during the 2003 invasion of Iraq.
  In March 2006, the United States announced that it intended to withdraw the greater part of the Icelandic Defence Force. On 12 August 2006, the last four F-15's left Icelandic airspace. The United States closed the Keflavík Air Base in September 2006. In 2016, it was reported that the United States was considering re-opening the base.
  Following elections in May 2007, the Independence Party, headed by Haarde, remained in government, albeit in a new coalition with the Social Democratic Alliance.
caption: The flag of Iceland being raised and the flag of the United States being lowered as the U.S. hands over the Keflavík Air Base to the Government of Iceland.
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