REYKJAVIK (Iceland) For centuries, Icelanders earned a living from the sea, setting out in small boats to haul cod, haddock and herring from the North Atlantic waters.

But in recent years these proud descendants of Vikings found new fish to catch, scooping up businesses around the world with the help of light financial regulation and turbocharged banks.

Now the sea may once again be Iceland`s lifeline. While the rest of the economy crumbles, the island nation`s fishing industry is booming, with big catches and rising export prices thanks to the collapse of Iceland`s currency, the krona.

“There was some banker who said we didn`t need the fishing industry”, said Helgi Mar Sigurgeirsson, chief engineer of a fishing trawler moored in Reykjavik harbour. “He said we could make money with the banks. I`d like to speak to him now”.

Fishing is so entwined with Iceland`s national identity that the country`s coins carry pictures of cod, crabs and capelin. Generations of Icelanders have harvested the rich fishing grounds around the volcanic island, where the warm Gulf Stream and cold Arctic waters meet.

It was a hard life, full of danger and conflict.

Between the 1950s and the 1970s, Iceland - sick of what it saw as poaching by foreign vessels - unilaterally expanded its exclusive fishing limit several times, ultimately to 200 nautical miles. The actions sparked a series of “Cod Wars” with Britain where Royal Navy ships sailed for Iceland and Icelandic coast guard boats cut the nets of British trawlers.

Iceland won the showdown, in part by threatening to kick Nato forces out of their base on the island, and has since gained international praise for managing its fishery sustainably while other countries have over-fished their stocks to extinction.

Whaling industry

Environmentalists and foreign governments are less enamoured of the country`s whaling industry. After an international moratorium since the 1980s, Iceland resumed whaling in 2006. The government says the fin and minke whales being hunted are plentiful in Iceland`s coastal waters, although fin whales are on the International Conservation Union`s “red list” of endangered species.

Iceland`s fishing industry has always punched above its weight economically. Last year fishing employed four per cent of Iceland`s work force, just over 7,000 people. But seafood accounted for almost half of Iceland`s exports, and 10 per cent of GDP.

“Fishing-related industries always have been the backbone of our economy”, said Iceland`s fisheries minister, Einar Kristinn Gudfinnsson. And with the economic crisis, “in relative terms fisheries will grow in importance”.

Seduced by quick money

In the last few years, hardy Iceland was seduced by quick money. Financial deregulation, a stock market boom and a surging krona helped Icelandic entrepreneurs go on a global buying spree. A new elite of super-rich Icelanders flew around in private jets and drove Hummers and Range Rovers through the streets of Reykjavik, a rough-edged fishing port turned gleaming capital city. One tycoon even flew Elton John to Iceland to perform at his 50th birthday party last year.

Jobs were plentiful in the booming economy. Hundreds of Eastern Europeans have moved to Iceland to work in fish processing plants - dirty, smelly jobs Icelanders no longer wanted.

“We couldn`t keep them going without foreign labour because the Icelanders were too busy working in the banks”, said Sigurdur Sverisson, spokesman for the Federation of Icelandic Fishing Vessel Owners.

When the credit crunch hit, Iceland`s high-flying banks were left struggling to service debts that amounted to nine times the country`s GDP. In early October, the three main commercial banks were taken over by the government as they collapsed.

Layoffs that began in the banks have rippled through the economy as many businesses struggle to survive. Many Icelanders have found themselves unable to pay car loans and mortgages.

Now, Sverisson said, “people are lining up for jobs in the fishing industry”.

On Reykjavik`s wharves, forklift vehicles scurry about unloading crates of cod, monkfish and other species in dockside warehouses. Within hours much of the day`s catch will have been sold at an internet auction and headed for Britain, Spain, the Netherlands, the US and other countries.

This year`s season is good. Fish are plentiful, and prices for many species are high.

EU threat

But Sverisson sees a new threat to Iceland`s fishing industry - the European Union. The economic crisis has persuaded many Icelanders the country should join the 27-nation bloc and adopt the euro single currency. Sverisson says that would mean signing up to the EU`s common fisheries policy.

“By joining the European Union we would not have the controlling rights of the stocks anymore”, he said.

For now, fishermen are the poster boys of Iceland`s long slog to economic revival. Sigurgeirsson, 34, has been at sea for 10 years and is bemused by his industry`s new image. He says fishermen are being painted as a cross between national saviours and fat-cats who haul in big salaries from bumper catches.

Trawler crews spend as many as 200 days a year at sea - up to 40 days at a stretch - and receive a share of the catch, so their income fluctuates. Sigurgeirsson says that for every boom year there is another when crews make only the statutory minimum wage.

“On the news they are talking about us now. They say we are making money for the nation”, said Sigurgeirsson, sitting amid coiled ropes and weathered waterproofs below decks of the trawler Faxi. “We have been doing that (all along).

“Now everybody is saying `We`re in the same boat.` Well, I wasn`t on the boat with the bankers. I wasn`t invited to the birthday party with Elton John. I was in the North Atlantic ocean”.—AP