The dept. of the Interior has been talking about expanded investigatory powers for police but those are aimed at when they can open an investigation without prior cause.

There is no spy agency in Iceland. We are a nation of roughly 350k people. Last interior minister actually sent the FBI packing when they came to investigate something.

It is highly unlikely that our current government is colluding with the US. Transparency is too high and anti-American sentiment as well. Don't forget, we're in total about half the size of an average American suburb, everyone knows everyone, there's very little you can gain from spying as opposed to asking.

Spying electronically on Icelanders is a useless and expensive pursuit, if you want to know anything you go downtown and sit around while your average Joe or Jane talk about it.

Talking to people? What a concept!

Seriously though, it is amazing how much information can be gleaned from someone (rightly or wrongly) if you just sit down and talk with them for a bit. And even more information about someone's true feeling can be determined from their non-verbal communication, something that electronic surveillance (like email snooping) can do nothing about.

There's a recurring joke in advertisement in Iceland. If you have a fringe product with a well defined demographical following (say, upper-middle-class females, 40-50), you'd reach them better by throwing a small party with drinks on the house and inviting them than with media advertisement.

To get a handle on how bad domestic spying is in practical terms, consider that the US outspends the rest of the planet in military spending. Surveillance spending is likely to be roughly proportional. A small nation with low military spending per-capita could fall below the threshold of operating an effective surveillance state, just as they could fall below the threshold of operating a blue-water navy.