Iceland in summer.

The Central Bank of Iceland has today kept its benchmark interest rate at 15.5%. Economists had expected it to raise the rate to boost its currency, the krona, which has fallen 20% against the euro this year. Despite economic woes, the quality of life in Iceland has been ranked as among the best in the world and this week, Iceland headed the Global Peace Index.

The inflation rate in Iceland reached 11.8% last month, compared with the central bank's 2.5% target.

Ireland, another small open economy on the periphery of Europe, is lucky to be within the protective embrace of the European Monetary System where the benchmark interest rate is 4%.

Opponents of the EU Lisbon Treaty, which will be subject to a referendum in Ireland next month, worry about issues such as neutrality and democratic deficits but outside the imperfect Union that has been a key factor in the transformation of the Irish economy, life would be much more uncertain in these turbulent times.

Global Peace Index (GPI),

Most countries in the world are performing better against key measures of peacefulness compared with last year, according to the latest rankings of the Global Peace Index (GPI), now in its second year.

This year the Index has been expanded to rank 140 countries - from Afghanistan to Zimbabwe - according to how peaceful they are, both domestically and how they interact with the outside world.

The Index is constructed from 24 indicators of external and internal measures of peace including UN deployments overseas and levels of violent crime. It has won the backing of an influential and distinguished group of supporters including Nobel Laureates Archbishop Desmond Tutu, Professor Joseph Stiglitz and Professor Muhammad Yunus as well as the Fulbright Center.

Steve Killelea, founder of the Global Peace Index, said: "The world appears to be a marginally more peaceful place this year. This is encouraging, but it takes small steps by individual countries for the world to make greater strides on the road to peace."

Supporters of the Index are urging policymakers to focus more on education, wealth and well functioning government to secure a greater peace dividend. They are also pointing to the crucial role of business in forging stability.

Iceland, making its first appearance in the Index, tops the rankings. Countries in Scandinavia have also emerged as among the most peaceful countries on the planet with Denmark (2) and Norway (3) scoring very highly. New Zealand (4) and Japan (5) - the only member of the G8 in the top ten - complete the highest ranked. The United States held virtually steady at number 97, dropping one slot from last year's rank of 96. Ireland got a 6th ranking.

But other nations, including Angola (110), Indonesia (68) and India (107), have demonstrated the greatest improvements compared to last year's Index.

Based on a direct comparison of the 121 countries measured in the GPI 2007 to GPI 2008, a majority of the individual indicators have seen slight improvements. On average, scores for level of organised conflict (internal) and violent crime, political instability and potential for terrorist acts have all improved marginally. In contrast, the world's armed services have grown on average per country, as has the sophistication of its weaponry.

Other key findings:

--  Small, stable and democratic countries are the most peaceful - 16 of the top 20 are western or central European democracies
--  The G8 fared very differently: Japan (5), Canada (11), Germany (14), Italy (28), France (36), UK (49), United States (97), Russia (131)
--  Iraq is the lowest ranked country on the Index (140) This year's launch is also highlighting the link between business and peace and the role that business has to play in creating more peaceful societies. The Study of Industries that Prosper in Peace report released today alongside the Global Peace Index points to the correlation between peaceful countries and business activity.

Archbishop Desmond Tutu said: "You ultimately can't have business where you have conflict. So, it is in the nature of self-interest to promote the kind of circumstances and the kind of environment where you can carry out your business when there is peace."

Since the first Global Peace Index was launched in 2007, it has been used as a tool by Presidents, Prime Ministers and academics. But Killelea believes the Index should be used by business to make more informed investment decisions and, while he acknowledges the role of business in creating peace, he is calling for business to do more.

"There is no doubt that investment and business benefit from more peaceful and less violent environments," commented Sir Mark Moody Stuart, chair of Anglo American and the UN Global Compact Foundation.