1942: Iceland

In 1942 Iceland was less menaced by war than baffled by peace problems. As the stepping stone from the United States to her British and Russian allies the island remained a post coveted by Germany, but except for some slight bombings, her main troubles were those of inflation, strikes, political rivalries and parliamentary shifts.

This island, noted for its ice fields, volcanic eruptions and earthquakes, was of increasing importance during 1942, as both Russia and Britain required enormous quantities of United States supplies via Iceland. And with American troops moving eastward by many thousands, it became imperative that no German thrust against Iceland should succeed. The occupation of Norway, some 600 miles away, by Germany, made Iceland indispensable to the Allies; without it, plane and ship travel from and to America would have been critically interrupted. The presence of United States armed forces seemed still agreeable to the public, Iceland herself having invited them in 1941, and by a later vote of 39 to 3 approved the action. Resentment against Great Britain for her uninvited occupation subsided after the British troops left. The American Red Cross announced during the year its intention of erecting a building in Reykjavik, the capital, to cost $150,000. It was to include a restaurant, music rooms, accommodations for billiards, bowling, and other recreational features for the troops.

War conditions had brought to the island difficulties of quite a new nature. Through a thousand years, this people had lived quietly, peaceably, constructively. But on April 9, 1940, Germany had invaded Denmark, and on the next day Iceland's Althing assumed control of her foreign affairs. In May 1941, the Althing voted (as long anticipated under the Act of Union of 1918), to cancel the slender remaining union with Denmark, to declare Iceland completely independent, to elect a regent to function as the king, and to introduce a republican Constitution. As 1942 opened, Icelanders looked back on eighteen months of occupation by British and American troops; a flood of new consumers with quantities of money; an unprecedented demand for goods; Icelandic funds, amounting to from 150,000,000 to 160,000,000 crowns, frozen in Britain; rising prices; pressing needs for wage adjustments.

From 1939 until July of 1941 her trade with Germany had dropped from 7,600,000 crowns to zero; with Scandinavia from 23,000,000 crowns to about 2,000,000; trade with Great Britain had soared from 12,000,000 to about 180,000,000; with the United States, from 7,000,000 to about 24,000,000; her total trade had risen from about 69,000,000 crowns to some 220,000,000.

Government receipts for 1941 were about 18,000,000 crowns, expenditures slightly less. The budget for 1942 was the highest in history: income estimated at 34,000,000 crowns, expenditures at 29,000,000.

The year 1942 began with the United States agreeing to pay in United States dollars for all fish and fish products sold to Britain, thus giving Iceland American dollars for American purchases. But numerous strikes for higher wages led to differences within the Government, between the two largest parties on the one hand, the Independence and Progressive Parties, and the Socialist Party on the other. On January 8, a provisional law was signed by the Regent; it provided for arbitration in all wage matters; a keeping of wages in general at 1941 levels, with the invalidation of all contracts made since January 1, 1942; the fixing of prices on necessities; and the forbidding of strikes and lockouts.

On Feb. 15, the Althing convened, faced with rising prices and with the unprecedented budget. It was reported that because of war-time developments the trade balance had been 'favorable' for 1941, with imports at 129,000,000 crowns, and exports at 188,000,000; this fact, together with expenditures by occupying troops, aids fishing and mercantile groups much more than it does the farmers.

July was a dramatic month. On the 7th, the United States recognized by a special broadcast the first anniversary of the arrival of her troops on the island. In July Mr. Leland Morris, former American chargé d'affaires in Berlin, was appointed to succeed Mr. Lincoln MacVeagh as Minister to Iceland. The Icelandic Legation in Washington was enlarged by the addition of two new officials; and on July 11 the signing of a Lend-Lease agreement with Iceland was announced. Some of its provisions benefit Britain as well as the United States.

Germans turned their attention to Iceland in September, with several long-range bombing raids. No casualties were reported, and very little damage, the attacks being upon isolated points and fishing trawlers.

By mid-summer, Iceland was in the grip of inflation. The cost of living had risen 20 per cent in one year, 100 per cent since the beginning of the war. The occupying troops, the building industries, and fisheries were competing for labor. Unprecedented sums of money were in circulation.

In the October elections the results were, by parties: Independence, 20 seats; Progressives, 15; United Socialist (Communist) 10; Social-Democrats, 7. Preceding the meeting of the Althing late in the year party leaders were holding conferences on the advisability of a coalition government.