P>Midway between Scotland and Iceland in the North Atlantic, the Faeroe Islands have a moderate climate for their latitude – a result of the warm Gulf Stream current. Home rule since 1948 has given the Faeroese a strong sense of national identity – they voted against joining the European Communities with Denmark in 1973, but now have favorable terms of trade with most EU members. Fishing is the dominant industry, providing over 90% of exports. In the face of international criticism, the Faeroese have continued their traditional cull of pilot whales and bottle-nosed dolphins. Sheep farming is important, and there is a small textile industry which exports traditional woolens, and puffin and eider-duck feathers.

Denmark's moves toward ever closer European integration has strengthened calls in the Faeroes for full independence. Negotiations to establish a "sovereign nation" under the Danish monarchy began in 1998. However, the Danish government's threat in 2001 to suspend subsidies to the islands quashed calls for a referendum.