Little bit late to this thread, but Iceland is a little love of mine. Here's my attempt at making Iceland as prosperous as possible.
- As the Nazis invade Denmark with barely a fight, the Danish Royal Family and high rank officials evacuate to Iceland, as a country in personal union with Denmark, and from where they can act as a shadow Government preparing for a free Denmark again. This act bring a few hundred extra people to Iceland, but crucially a fair amount of wealth to an otherwise poor country.
- After WWII, many Danes return; however some stay, and by 1944 some have had kids in Iceland or at least "procreated" with the locals. Christian X returns to Iceland, but his second son Knud stays in Iceland to act as the King's representative in Iceland where he became semi-popular after learning Icelandic. The 1953 Act in Denmark removed Knud as heir presumptive, and so without much of a role in Denmark to return to, Knud opts to stay in Iceland.
- The remaining US Air Force base at Keflavik provides further stimulus to the economy, as US soldiers bring further wealth to Iceland and provide employment for the locals. The influx of Americans (and residual Danes) create a counterpush by the Icelandic Government for all education to be in Icelandic, the provision of Icelandic language-only radio and television, although foreign language newspapers remain in circulation. Tighter rules on family names are also enacted, to stop the bleed of Nordic patronymic names.
- Iceland rapidly modernises in the early stages of the Cold War, and despite the US/NATO base as Keflavik is generally regarded as fairly neutral due to it's absence of a military. A first aluminium smelter is built in the 1960s, rapidly followed by a second in the 1980s. Aluminium and fish become the staple exports of Iceland, and the rapidly enlarging economy requires further immigration - which is aimed at the other Nordic countries (in the Nordic Passport Union), although the 1970s see a number of Britons enter as Britain struggles with it's economy. Local "immersion" classes are held to help immigrants integrate with the language and culture of Iceland...as well as the cold.
- Meanwhile, the Government encourages children by free education and childcare, creating a spike in childbirth.
- The 1980s see Iceland, and it's "local royalty" now of Princess Elisabet and her Icelandic husband, playing host to a series of "detente" conferences between NATO and WP countries. The venue is popular; not only is it a quasi-neutral venue, roughly midpoint between the 2 major anchors of NATO and WP alliances, but the smaller country makes it easier to hold more regular "unofficial" talks without the press outside the door. The country is now a principality, centred on the descendants of Prince Knud.
- As the 1990s develop, Iceland becomes a convenient transit/connection point for transatlantic flights, with Icelandair offering many Europe - North America flights connecting via the expanding airport at Keflavik now that the US Air Force has left. Icelandair copy Finnair in opening direct routes to Japan, Korea and China bypassing Soviet air restrictions - and in faster times from Europe. Reykjavik Airport mostly closes, with domestic flights transferring to Keflavik Airport for connections as the rail link opens, although the airfield remains open for governmental/diplomatic planes..
- As the 2000s begin, Iceland begins a push to diversify, by attracting internet companies to host in Iceland - with fast telecoms access to both North America and Europe. The cheap geothermal electricity reduces hosting costs, whilst the cold outdoor air has vastly reduced cooling costs, attracting the likes of Yahoo, Google, and several game server companies to host in Iceland. An HVDC link to the UK, providing some electricity export potential to the UK (as well as the Faroes en route), brings in further revenue to the country.
- Low cost airlines promote tourism, which promptly rises and hotels shoot up as the country plays to it's strengths as the "outsider's holiday retreat", enjoying the wide outdoors, whilst retaining a rich set of city services - bars, restaurants, and some cultural landmarks in the city centre. Tourist crowding at popular sights in the countryside though have forced the Government to introduce ticketing on vehicle parking to maintain sites, and rising numbers are proving problematic - how do you market yourself as a natural wonder if all people can see are crowds? Expansion of tourist schemes is expected to the east to try and spread the tourist numbers over more sights than just the few around Selfoss. Environmentalism is promoted further by attempts to reforest some areas of Iceland, although the position of Iceland in the far north makes tree growing a slow process.
By 2017, the population of Iceland is around 500,000; Reykjavik is a busting semi-cosmopolitan capital of 350,000'ish, playing host to intergovernmental conferences as well as international company conferences a year (as multinational companies host meetings at the midpoint thanks to it's excellent air links between Europe, North America and the Far East via the polar route). Akureyri in the north remains a popular destination for backpackers and the "off-piste" holidaymakers, with a population of around 50,000. The larger population forces several costly infrastructure projects in the 1990s as car congestion caused problems in the capital and in the countryside as tourists filled small country roads. New roads need to be built, and a monorail line (a route which busted the bank, but the underhanging monorail style made the route far more impervious to the snow and ice which made it far better utilised) links the airport, Reykjavik, Selfoss (for the tourist sights of Thingvellir, Geysir, Gulfoss and Fludir Spa), as well as north linking in the overspill towns of Akranes and Bourganes. Iceland views itself as a second Switzerland - mostly neutral although trading extensively with the European Union, United States and Canada, as well as the Caribbean for bauxite imports.