Damon Albarn, the lead singer of Blur, has a lot to answer for. First he puts together a few chirpy tunes and is credited with the invention of Britpop. Next he says how he loves the Good Mixer in Camden, and the Good Mixer gets overrun with French tourists. And then he records his Departure From Britpop album in Reykjavik, the capital of Iceland, buys a flat in the city and some shares in a local bar, and lo, Iceland is the hippest place on earth. It's not all Damon's fault. Jarvis Cocker often visits this largely uninhabitable island - apparently he likes the fishing. Prodigy, Skunk Anansie and Lush come too; glossmags from Arena to Minx have trotted along to tell of the wildness of Reykjavik, the flourishing nightclub and techno scene, the, ahem, "Icepop" phenomenon of bands like Gus Gus and Botnledja and Bong; and the Icelanders have their first international superstar in Bjork. But is that it? We've had Barcelona, we've had Seattle, we've had Leeds.
Is Iceland really as cool as they say it is? English pop stars like it because fame means nothing in Iceland, according to Arni Matthiasson, a writer who spent eight years working on a fishing trawler. "There are so few of us here that it doesn't take much to get famous," he says. The population of the entire island is 260,000, about half the size of Bradford, and every inhabitant averages five or six appearances on TV. "Damon walks down Laugavegur (Reykjavik's main street) and nobody says a word. Roland Gift from the Fine Young Cannibals used to spend his summers here, and nobody spoke to him. Eric Clapton came here to get away from it all after the death of his son. And one night I bumped into a sodden drunk man staggering all over the place - and I turned round and it was Jarvis Cocker!" he says. "No one cares, no one notices."
A photographer says, "People from the British newspapers call me asking if I have pictures of Jarvis cavorting with bunny girls in the Blue Lagoon `a pool of sulphurous, steaming spring water' after Bjork's new year party. And I just go, `get off his back'. Stefan Arni, a member of the ultra-hip art-technoists Gus Gus, says, "Icelanders don't have a word in their dictionary for superstardom. We don't have a sense of discriminating people in that way. Yet."
What the Britpoppers love too is the rather less popstarry joy of the countryside. Poet Simon Armitage calls Iceland "a wound in the earth's skin that keeps mending and cracking as the planet flexes its muscles." Or, in the words of Alex from Blur, "The great thing about Iceland is it's really happening, geologically." Volcanoes, geysers, glaciers, black beaches, moonscapes - Iceland's scenery is suitably head-stretching and apocalyptic. In the summer it is light all the time, in winter it is always dark. But unlike what you might expect from its name and its location (just south of the Arctic Circle), Iceland is not cold. It is lapped by warm waters from the Gulf Stream and its rainy weather is similar to Scotland's. "It's great up there," says Damon. "The skies in Iceland are so clear and the air's so clear and the moon's always out." He likes it for less-than-natural reasons too. "They come out at midnight, drink all night, dance like bastards and then run through the streets shagging each other senseless," he says. "It's brilliant."
A night out in Reykjavik begins in Damon's bar, the tiny Kaffibarinn. (He owns only 5 per cent of it, which seems to mean nothing more than that he gets free drinks.) The music playing - surprise! - is Britpop, and the place is full of bearded bohemians smoking black cigarettes and drinking shorts. Maybe the locals who keep telling me how "civilised" the nightlife has become since beer was legalised in 1989 - 1989! - are right. Maybe the replacement of "the wodka" with beer has made an Icelandic bender a more sedate affair. But when midnight strikes, Kaffibarinn is bombarded with strapping, overdressed blonde girls. They are fresh-faced and eager and order - erm - wodka. It gets packed and the girls keep wanting to tell me the truth about Icelandic men. ("They are so unattractive." "At least they try.") The Icelandic men tell me to find out the truth for myself. We head off to the Shadow Bar, where the rather serious-looking clubbers are nevertheless falling over each other, drunk because they've been drinking at home all evening to save money. It's a bit like the Bigg Market in Newcastle - lots of flesh, sex in every corner.
Finally, to Kaffi Reykjavik. It is a place defined by its "smart casual" dress code, its apparent divorcees-only entrance policy, and the Vikings with wandering hands who want to show me "the real Iceland". One beardless Norseman talks to me in Icelandic for 10 minutes without realising that I don't understand him. "We know how to have fun big time!" says a blonde, shimmery girl called Andrea with an MTV Europe accent. And as she spews on to the pavements at the end of another night, the sun having not come up because it's never really gone down, and drapes herself on a similarly staggering boy in Farrah trousers, you have to say that she's right. It's no wonder they go for it. The summertime all-round brightness leads to the kind of disorientation that only alcohol or sleep can cure, and it's hard to drop off when the sun's streaming through the curtains. So they drink. Yet alcohol consumption is fairly low - people only go out drinking on Friday and Saturday nights.
A survey published this year by the Netherlands Organisation for Scientific Research found that Iceland was the happiest nation on earth, and studies carried out by Stefan Olafsson, professor of sociology at the University of Iceland and director of the Social Science Research Institute, have consistently shown that Icelanders have a very high standard of living, and are generally happy with their lives. The first reason for this is the most obvious - economic prosperity. Iceland has no ghettoes, no homeless, little unemployment (rising, but still only 4 per cent), a highly efficient health service and one of the lowest crime rates in the world; the houses are well-kept, the streets are clean, and there seems to be a policy of Trendy Clothes For All. Everyone - from seven-year-olds to the elderly, though this is a young population - has slim hips and wears platform trainers. Dole is 50,000 krona (£430 sterling) a month and as Matthiasson says, not quite tongue in cheek: "Poverty in Iceland means not having a satellite dish."
Liberal equality is something on which Icelanders pride themselves. Gay marriages were recently legalised, and there is an understanding that promiscuity is open to all. "For a girl to go out and get laid is considered the same as a boy," says Edda. No one seems to mind, although this is the most parochial of countries - there are only two TV stations and everyone is listed in the phone book under their first name. Attitudes to race, however, are rather untested. The non-white population of Iceland is around 0.003 per cent, mostly Vietnamese and Thailanders running restaurants in Reykjavik. "We tend to say we are not a racist country, but that's easy to say when there are no other races," says Mathiasson. Local trendies say they call The Piano Bar "The Cave, because that is where the black people go." "There is definitely racism here," says Olafsson. "We are a small nation, we have our own language, our own culture, and there is a strong sense that it must be preserved." Indeed, in a blatant act of linguistic extremism, immigrants have to take Icelandic names, so that Ho Chi Minh might become Halldor Chi Minh.
For Damon, the flat in Reykjavik is a temporary home, so the likelihood of the lead singer of Blur renaming himself Arni Albarn appears remote. He may even have to find somewhere else to colonise; his publicist says, "He doesn't want to talk about Iceland any more, he doesn't want everyone to go there and spoil it." He is worried Iceland will turn into "the new Ibiza". But with beer costing pounds £5 a pint, with sharks, blackbirds and puffins on the menu, and suntans hardly guaranteed, it looks unlikely that the hordes will spoil his idyll yet.