1970-2007 on the Faroe Islands

The years from 1970 to 2007 mark a new period in the relationship between Denmark and the Faroe Islands. The Home Rule Act had not created calm in the often quite tumultuous relations between Denmark and the Faroe Islands, but it had given the Faroe Islands the opportunity to take care of the Faroe Islands’ interests within some wide boundaries.

The period of home rule had begun with a series of the Faroe Islands taking over a number of areas, but since then, takeovers had few and far between, even when independence parties were in power. However, the period from 1970 to 2007 saw the beginning of some new takeovers, but ended with the most turbulent period to date.

Position in the kingdom and administration

In 1970, Denmark adopted the Municipal Reform, which it also had an impact on the Faroe Islands. In connection with the reform, hospitals, public welfare and schools were some of the areas outsourced to the Danish county municipalities, and the state subsidies to the municipalities were since changed to an annually agreed block grant.

During the first years of its existence, the Faroese home rule had taken over several areas from list A and a few from list B. But it was usually areas that were easy to manage and economically easy to take over. This had also been the case in the years 1963‑67, when a coalition of independence parties was in power.

Major changes in this field did not happen until after 1975, when the socalled ‘takeover coalition’ under the leadership of Javnaðarflokkurin was organised together with Fólkaflokkurin and Tjóðveldi. Already in 1976, the coalition took over the postal services, which was on list A, since it was expected that sale of Faroese stamps would make the takeover a reasonable business. But list A also included hospitals, public welfare and schools. The challenge was that these extremely important welfare areas were not only administratively heavy, they were also extremely challenging to take over from an economic perspective.

The Faroese Government was therefore not able to take over responsibility for these areas under section 2 of the Home Rule Act. But after the Municipal Reform in 1970, the Danish authorities were very keen on finding a similar arrangement for the Faroe Islands as for the Danish county municipalities. Therefore, focus was aimed at section 9 of the Home Rule Act, which made it possible for the home rule and the Danish Government to agree on the extent to which a policy area should be taken over. In this case, the agreement was that the home rule should take over authority to issue executive orders within these areas, while the treasury still had to cover the expenses it had incurred in the area. Already in 1975, the home rule took over parts of public welfare, including the pension area, under section 9. In 1976, parts of the health sector was transferred in the same way, and in 1979, the school area was also taken over under section 9. Later, other parts of these welfare areas were also taken over by the home rule. Regardless of the fact that the Faroese Government did not take over full economic responsibility for all the areas, it became necessary to build a strong administrative machinery.

In 1992, the Danish Government and the Faroese Government agreed that the home rule should take over the policy area of underground deposits of raw materials from list B subject to section 2, and since then the Løgting has been fully responsible for the area.

The financing of the areas on lists A and B, which had still not been transferred, had usually implied that the Faroese Government paid half, while the treasury, through a reimbursement scheme, paid the other half of the expenses. In connection with the takeover of these areas, which the Danish state still had to finance, the Danish Government wanted the state subsidy to be changed to a pre-agreed block grant as was the case in Denmark. This scheme was introduced in the Faroe Islands in 1988, and since then the Faroese Government and the Danish Government have agreed the size of the grant in the year or years to come in advance. After this, the Danish state no longer reimbursed expenses incurred for these areas; instead, the Danish Government transferred the agreed amount to the home rule, which could thus freely dispose of the amount according to the Faroese Finance Act.

The organisation of the Faroese society’s administrative system had been established in 1948 based on a society where most areas were administered under a Danish system. However, with the many takeovers in the 1970s, it became problematic to maintain a comprehensive administration without a clear distribution of responsibilities between the areas.

In 1995, the Løgting therefore established a new administration system, which at the political level introduced a clear division of responsibility between the members of the Faroese Government and ministerial responsibility for the individual members of Faroese Government.

At the same time, negative parliamentarism, which had not been part of the political system, was introduced. Accordingly, the Løgting could, with a majority of all members, unseat a member of the Faroese Government, the prime minister, or dissolve the entire Faroese Government. Furthermore, you would no longer be able to sit in both the Løgting and the Faroese Government. The Løgting’s control over the Faroese Government was thus strengthened, while, at the same time, the prime minister – not the Løgting as before – was charged with appointing the members of the Faroese Government, whom he could now also remove. A week after a vote of no confidence, the prime minister retained the authority to call new elections for the Løgting. At the same time, separate ministries were established under each of the members of the Faroese Government, which from 1948 to the 1970s had grown from three to seven, with responsibility for their respective areas and institutions.

In 2002, the school area and public welfare were taken over again, but this time subject to section 2, and the areas thus became the responsibility of the home rule in terms of both legislation and financing. The hospital sector has still not been taken over again by the home rule subject to section 2. However, the difference between the partial section 9 and full section 2 takeovers has, with the conversion of the state subsidy into block grants, become less significant for the home rule’s actual responsibility and latitude regarding areas taken over subject to section 9, since, with the conversion, the Løgting has otherwise gained full economic responsibility for the hospital sector.

The Home Rule Act is still in force, but an amendment in 2005 meant that the areas on list B, which require agreement between the parties to be taken over, were abolished. And instead of a positive list of the policy areas that could be taken over, a positive list was drawn up of the policy areas that were not included: the constitution, citizenship, the Supreme Court, foreign, security and defence policy as well as currency and monetary policy, which are Danish areas of responsibility. Apart from these policy areas, the home rule decides whether an area is to be taken over and negotiates with the Danish Government about the timing of the takeover.

Municipalities

The number of Faroese municipalities remained stable at 51 from 1970 to 2004, when the number was significantly reduced to 30 in 2008 and later again to the current 29. The intention was to reach a number of eight-nine evenly sized municipalities that would be able to take on major tasks from the Faroese Government, but the municipal mergers were carried out voluntarily and without any overall plan. The result is that there are fewer municipalities, but they are very different in size, from Tórshavn, which covers a quarter of the population, to very small villages. The Faroese Government has therefore had to enforce cross-municipal cooperation in connection with the outsourcing of heavy tasks such as old-age care to the municipalities. Contrary to the intention, a new administrative link has thus been established between the Faroese Government and some of the municipalities. At the same time, the democratic supervision of these cross-municipal units is much less than in the Løgting and in the actual democratically elected municipal councils.

The Evangelical Lutheran Church

The Evangelical Lutheran Church, which had been under the Diocese of Copenhagen since 1923, was taken over from list B in the Home Rule Act on ólavsøka in 2007, following political negotiations between the home rule and the Danish Government.

Business and population

At 95 %, fishery products continued to be the dominant export product, but the fishing industry underwent major changes during the crisis of the 1990s, when subsidy schemes for the industry were phased out. The profitable shrimp fishery off Greenland became vital during the 1970s but has been in decline in recent years. The pelagic fishery gained great importance for the economy towards the end of the period, while the number of filleting factories, on the other hand, was greatly reduced due to the crisis in the 1990s.

A new business, salmon farming, emerged at the beginning of the period. In 1993, disease and expensive loans threatened the industry, which, however, survived and became vital to the Faroese economy until 2000, when it came under serious threat again, this time by the ILA disease among the salmon populations. However, ILA was overcome, and now salmon farming constitutes a large part of the Faroe Islands’ exports.

The population increased from around 38,000 in 1970 to around 48,600 in 2010, but the growth was not steady. Already at the beginning of the 1990s, the population was at the same level as in 2010, but the crisis in the 1990s meant that about 13 % of the population moved from the Faroe Islands, and it was not until the end of the period that the population had reached the same level as in the early 1990s. The large population growth and population concentration took place in Tórshavnar Kommuna, where approx. 40 % of the population lived in 2010, while Runavíkar Kommuna on the eastern side of Skálafjørður had 7.8 % of the population in 2010. Klaksvík remained relatively stable with approx. 10 % of the population, while Suðuroy, Sandoy and the sparsely populated and remote islands experienced a decline in population.

Infrastructure and transport

During the period from 1970 to 2007, the physical connection between the islands underwent a real revolution. The first bridge between islands in the Faroe Islands was opened in 1973 when the bridge between Streymoy and Eysturoy opened. This bridge link connected the two largest islands, and three years later – in 1976 – the tunnel opened from Norðskála with a connection to Skálafjørður and north to Fuglafjørður and Leirvík, where there was a ferry service to Klaksvík. It was now possible to drive from Tórshavn over Oyggjarvegin and via the new bridge to Skálafjørður or Leirvík and on by ferry to Klaksvík and the islands to the north. In 1992, the Kaldbak Tunnel opened, making it unnecessary to drive over Oyggjarvegin to Skálafjørður.

The infrastructure was also expanded in Norðoyggjar. From 1979 to 1985, four tunnels were opened on Kalsoy between the four villages on Kalsoy, from which there was a ferry service from Syðradalur to Klaksvík. On the neighbouring island of Kunoy, a new tunnel connected the two villages on Kunoy in 1988, and since 1986, there has been a direct road from Haraldssund over a dam to Klaksvík and the villages to the north. In 1974, a dam across Hvannasund connected the islands of Borðoy and Viðoy, from which there was a road – which in 2016 was replaced by a tunnel – north to Viðareiði. In 1974, a modern car ferry service was established between Klaksvík and Leirvík, which was the main connection to the rest of the country until 2007, when a tunnel under Leirvíksfjørður connected Klaksvík and Norðoyggjar with a fixed road to Eysturoy and on to Streymoy.

Before that, in 2002, the first undersea tunnel in the Faroe Islands was opened between Streymoy and Vágar, where an airfield that the British had originally built during World War II since the 1960s had become the main connection between the Faroe Islands and the rest of the world with several daily flights to Denmark and other destinations. From Tórshavn, in particular, there are almost daily services to Denmark and Iceland with cargo ships and car ferries.

An undersea tunnel between Sandoy and Streymoy is under way (expected to open for traffic in 2023). Suðuroy, on which a tunnel between Ørðavík and Hov was opened in 2007, is the only major island not connected by a fixed road to the rest of the Faroe Islands. An undersea tunnel from 2020 between the densely populated area at Skálafjørður and Tórshavn has linked these areas closely together.

School and education

In 1974, an alternative to the three year high school was introduced, the two-year higher preparatory course, which gave students with a 10th grade exam access and the possibility of being admitted to a higher education. It started in Hoydalar, but as something new also outside Tórshavn, namely in Klaksvík and on Suðuroy and in 1980, also in Gøtugjógv on Eysturoy. In 1982, a new high school and higher preparatory centre was established on Eysturoy, which also included the higher preparatory courses in Klaksvík, while the higher preparatory course in Suðuroy was part of the course in Hoydalar. Since then, other high school-level programmes have been started, such as a special fishery-based high school programme in Vestmanna.

In 1979, the system with two threeyear tracks after 7th grade, the lower secondary school leaving examination and grades 8‑10, respectively, changed entirely; and the lower secondary school leaving examination was abolished.

In 1976, the first stage in the construction of a new technical school in Klaksvík was inaugurated, and it was completed in 1989 and was able to offer programmes in machinery, carpentry and electricity. The technical school in Klaksvík, which has since been expanded, has since 1992 also been offering a combined technical and high school programme. In 2009, a new high school in Hov on Suðuroy, which was also to house the Faroe Islands Health School, was inaugurated; in 2018, a new high school in Tórshavn, Glasir – Tórshavn College, was opened.

Fróðskaparsetur Føroya (University of the Faroe Islands) was established as an academy in 1965. Initially, only a single academic was employed at the university, a professor of Faroese, but in 1972 a natural science department was added, and in the period 1982‑92, the university also had a history and social science department. In 2008, the teachers’ school and the nursing school merged with the university.

Politics

The 1970s ushered in a new era in Faroese politics with the takeover of administratively heavy policy areas, and the period ended with some tumultuous years in the relationship between Denmark and the Faroe Islands. In addition to the significant takeovers, the Faroese Government also had to deal with major changes in the international arena. The oil crisis in 1973 created great unrest around the export-oriented fishing industry, and at the same time, Denmark became a member of the European Community. The Faroe Islands, which, by virtue of its home rule status, were allowed to take an independent position on membership, chose to remain outside the European Community because of the fishing industry. The background was that the coastal nations would be able to place the limit of the territorial waters at 200 nautical miles, which would mean that Faroese fishing vessels would be cut off from fishing in the territorial waters of other coastal nations in the same way as other countries’ fishing vessels would be cut off from Faroese territorial waters. In 1977, the Løgting, in agreement with other coastal nations, decided to move the Faroese limit of the territorial waters from 12 to 200 nautical miles.

The Raw Fish Fund

Against this background, the Faroese Government introduced the so-called Raw Fish Fund in 1975, the purpose of which was to defend the Faroese fishing industry against the sharp fluctuations in prices for fish and oil on the world market. However, the fund also became very important for the transition of the fishing industry to the new international conditions. The idea was that those who fished and sold highly priced fish species on the world market should pay part of their profit to the Raw Fish Fund; those who fished and sold low priced fish species on the world market would then get funding from the fund. The fund was to be managed by a board which represented all parties in the fishing industry and the Faroese Government, and it was to be non-profit. Any loss would have to be carried by the Faroese Government. However, one consequence of the fund and the funding schemes was that the fishing industry did not adapt to market terms, in fact it became more dependent on funding from the fund.

During the 1980s, the fund and the funding schemes ended up costing the Faroese taxpayers DKK 6 billion. In addition, ships were often built with guarantees from the national treasury and often without equity. Despite the fact that this generated record foreign debt, there was no shortage of capital in the Faroe Islands. An interest act from the 1950s, which exempted interest income from tax, meant that it would pay off to borrow money and put them in the bank. As the same act meant that the deposit rate in the Faroe Islands was higher than the lending rate in Denmark, foreign capital began to flow into the Faroese banks in the 1980s. Deposits increased from DKK 2 to 7 billion during the 1980s, and the banks had no other option than to lend the money to Faroese who were unable to take out cheap foreign loans. On top of this, the Faroese Government pursued an expansionist fiscal policy with large deficits of DKK 300‑400 million on the Budget. The advisory committee of the Danish Prime Minister’s office warned the Faroese Government every year, but it did nothing to redress the economy – at least not until it was too late.

The economic crisis from 1992

In 1990, it the Faroese Government, which was no longer able to take out loans, was forced to wind up the Raw Fish Fund, resulting in bankruptcies. The national treasury guarantees became effective and converted private debt in the order of DKK 1.6 billion into additional public debt. The crisis became a reality when fishing decreased partly due to overfishing of the fish populations, partly because fish prices plummeted. Loans were cancelled, and the Faroese banks, as in the 1950s, were in dire straits. On Saturday 3 October 1992, the Danish Financial Supervisory Authority demanded that the Faroese-owned SJóvinnubankin should raise new capital of DKK 500 million if the bank were to open again on Monday 5 October. The bank’s management first turned to the Faroese shareholders, who were unable to raise new capital, and then to the Faroese Government, which was also unable to borrow the capital needed. In a hurry, the prime minister and the deputy prime minister went to Copenhagen to negotiate with the Danish Government.

On 6 October, the agreement between the Danish Government and the Faroese Government was made public. The Danish Government wanted to lend the Faroese Government DKK 500 million to put in the bank, but the conditions for the help were tough. Finansieringsfonden af 1992, a financing fund, was established with five members; three were elected by the Danish Government, including the chairman, and two by the Faroese Government, including the deputy chairman. The loans and the conditions that the Danish Government made for the recovery of the Faroese economy were to be administered by the fund. In fact, the Faroe Islands were put under administration.

The other large bank, Føroya Banki, also needed new capital, but since the bank’s main shareholder was the large Danske Bank, the obligation was with this bank. Danske Bank injected DKK 332 million into Føroya Banki. But the management proposed to Finansieringsfonden to make a share exchange with the Faroese Government in relation to Sjóvinnubankin, of which the Faroese Government was now the main shareholder, so that the Faroese Government would become the main shareholder of both banks. Danske Bank argued that it was anti-competitive that one bank was injected with public capital while the other was injected with new private capital. It would be an advantage for the Danish national authorities and Finansieringsfonden if the entire Faroese banking sector came under the control of the authorities.

In 1993, Finansieringsfonden presented an agreement on such a share exchange, which the Danish Government, the Danish Financial Supervisory Authority and Danske Bank all agreed to. However, the Faroese Government, which would then have sole responsibility for both banks after a share exchange, had doubts. At a meeting in Copenhagen on 17 March 1993, Prime Minister Marita Petersen asked the Chief Executive Officer of Danske Bank, Peter Straarup, if Føroya Banki needed more capital. Straarup responded that it did not need more capital, and that a share exchange would be advantageous for the Faroese Government. It was based on this promise that the Faroese Government approved the share exchange on 22 March 1993. However, Straarup was unable to keep his promise.

Just two weeks after the share exchange, Føroya Banki was informed by the Financial Supervisory Authority in Copenhagen that the bank did not meet the capital adequacy requirement of the Danish Banking Act. So in September 1993, the Faroese Government had to take out a loan from the Danish Government of DKK 1.2 billion to be placed in the bank via Finansieringsfonden.

The Faroese population initially accepted the measures, but the terms were tough. In the years 1993‑95, unemployment rose to over 20 %, many had to leave their home, and about 13 % of the population moved from the Faroe Islands, mostly to Denmark. The population also had to put up with an 8 % wage cut. However, critical voices began to emerge in 1994‑95. And in 1995, a unanimous Løgting decided to demand that the Danish Government set up a judicial inquiry of the share exchange. A commission was set up and submitted a report in 1998. The commission sharply criticised the Danish Government, the Danish Financial Supervisory Authority and Danske Bank and concluded that the Faroese Government had acquired a bank in 1993 about which it had not received all the relevant information beforehand.

The aftermath of the crisis

In 1998, the Danish Government entered into an agreement with the Faroese Government to compensate it for the share exchange, however, the same year, Faroe Islands elected a majority of independence supporters consisting of Tjóðveldi, Fólkaflokkurin and Sjálvstýrisflokkurin into the Løgting. The parties entered into a coalition agreement with the aim of establishing the Faroe Islands as a sovereign state in personal union with Denmark. The Faroese Government prepared negotiations with the Danish Government on an interim arrangement and a Faroese constitution. The intention was that the referendum should be on the interim arrangement and the Constitution.

The Faroese Government’s starting point for the negotiations with the Danish Government, which began in 2000, was an interim arrangement of 15 years to phase out the annual block grant of almost DKK 1 billion. However, it turned out that the Danish Government would not accept an economic interim arrangement of more than four years. After four futile negotiations in Copenhagen, the negotiations ended without an agreement. After political unrest in the Faroese Government, the prime minister decided to cancel the referendum, which was scheduled to take place in 2001. Instead, the Faroese Government decided in 2002 to take over schools and public welfare in accordance with section 2 of the Home Rule Act, and it initiated the first and largest reduction of the block grant, which, at a stroke, was reduced by DKK 366 million to DKK 626 million.

The independence coalition continued until 2004 with the support of a small centre party. Since then, there has been general consensus that the block grant must be maintained at the level at which it has ended up. No political agreement has been reached on further takeovers with a corresponding reduction of the block grant, but the question of a constitution has regularly been on the political agenda.

Further reading

• 1536-1850 on the Faroe Islands
• 1850-1920 on the Faroe Islands
• 1920-1970 on the Faroe Islands
• Ancient times on the Faroe Islands
• Argisbrekka
• Population trends on the Faroe Islands from 1327-2022
• The middle ages on the Faroe Islands
• The viking age on the Faroe Islands

Read more about History on the Faroe Islands