About Greenland

Houses in Nuuk (State Dept.)

Summary

Greenland, the world's largest island, is about 81% ice capped. Vikings reached the island in the 10th century from Iceland; Danish colonization began in the 18th century, and Greenland was made an integral part of Denmark in 1953. It joined the European Community (now the EU) with Denmark in 1973 but withdrew in 1985 over a dispute centered on stringent fishing quotas. Greenland was granted self-government in 1979 by the Danish parliament; the law went into effect the following year. Greenland voted in favor of increased self-rule in November 2008 and acquired greater responsibility for internal affairs when the Act on Greenland Self Government was signed into law in June 2009. Denmark, however, continues to exercise control of Greenland's foreign affairs, security, and financial policy in consultation with Greenland's Home Rule Government.

Greenland

On June 21, 2009, Greenland assumed increased autonomy under a Self Rule Act, deepening the “home rule” that had been in effect since 1979. Under self rule, the Greenlandic government (Naalakkersuisut) and the Danish Government are recognized as equal partners and Kalaallisut, the Inuit dialect, becomes the official language of Greenland. The Greenland Government intends to take responsibility for additional government functions gradually, such as prisons, criminal justice, courts of law, family law, passports, and mineral resources. The Danish Government freezes its annual block grant at the 2007 level of 3.2 billion kroner ($570 million, 2010 exchange rate). That grant will be adjusted for Danish inflation, though not the often higher Greenlandic inflation, meaning the value in real terms is expected to shrink in coming years. However, Greenland gains rights to its mineral, oil, and natural gas resources: the first 75 million kroner ($13.3 million) from mineral/oil/gas revenues would go to Greenland, with further revenues split equally between the two governments, and with Denmark’s share being subtracted from the annual block grant. Once the block grant is eliminated, any additional revenue would be subject to renegotiation between the Danish and Greenlandic governments.

The public sector in Greenland, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy and employs roughly 50% of the workforce. A large part of government revenues still comes from the Danish Government block grant--46% in 2009. The block grant remains an important supplement to GDP. About one-third of government revenue came from taxes in 2009.

Greenland's economy has been relatively unharmed by the global economic crisis. The main sources of income for Greenland are transfers from abroad, the value of fish production, and the direct and indirect effects of mineral exploration. Transfers from abroad are contained in agreements and will not be influenced by international trends, while the value of fisheries and mineral resource exploration is influenced by international economic developments. According to the Greenlandic Economic Council, real GDP is estimated (the most recent national account statistics are from 2007) to have contracted by 1.0% in 2009, followed by a recovery of 2.0% growth in 2010 and 3.0% growth in 2011. The outlook for 2012 is for zero GDP growth. The recovery was primarily driven by hydrocarbon and mineral exploration and exploitation investments, as well as high levels of construction activity in the capital Nuuk in 2010-2011 and the 2010-2011 increase in the price of fish and shrimp, Greenland’s main export. The 2012 outlook is highly uncertain depending on continued exploration activities. A commercial find of hydrocarbons or minerals could add significantly to activities, while disappointments could lead to contraction. Unemployment rose in 2008-2010 after an extended period from 2003 with lower unemployment. Unemployment now seems to have stabilized at the 2010 level. Structural reforms are still needed in order to create a broader business base and economic growth through more efficient use of existing resources in both the public and the private sectors.

Due to its continued dependence on exports of fish (mainly shrimp), which make up 85% of goods exports, Greenland’s economy remains sensitive to foreign developments. Greenland has registered a growing foreign trade deficit since the closure of the last remaining lead and zinc mine in 1989. The trade deficit reached $391 million, or 24% of GDP, in 2010. International interest in Greenland’s mineral wealth is increasing. International consortia are increasingly active in exploring for hydrocarbon resources off Greenland’s western coast; in November 2010, seven exclusive licenses for exploration and exploitation of oil and gas were awarded. There are international studies indicating the potential of oil and gas fields in northern and northeastern Greenland. The U.S. Geological Survey estimates that up to 17 billion barrels of oil and gas are present in the area between Canada and Northwest Greenland. Cairn Energy carried out three exploration drillings in Greenland in 2010, the first exploration drilling in Greenland in 10 years, and discovered gas and oil-bearing sands in one of the drillings. Drilling continued in 2011 but without significant finds. The U.S. aluminum producer Alcoa in May 2007 concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and associated power generation facility in Greenland to take advantage of abundant hydropower potential, although progress on that project has been delayed. It is estimated that, upon completion, the Alcoa investment would be worth approximately $2.5 billion. Tourism also offers another avenue of economic growth for Greenland, with increasing numbers of cruise lines now operating in Greenland’s western and southern waters during the peak summer tourism season.