This debut film by Icelandic director Baltasar Kormakur is a twist on the classic tale of what happens to a town/family/individual when a stranger turns up. The stranger in this case is Spanish dance teacher Lola, played by Victoria Abril, whose arrival in Reykjavik interrupts the go-nowhere life of twenty-something Hlynur.

As if being a Flamenco teacher weren't exotic enough in wintry Iceland, Lola is also a lesbian and turns out to be Hlynur's mother's lover. The result certainly has its comic moments but there is also a feeling of having seen it all before.

The aimlessly drifting youth, the vacuous nights of parties and random sex, apathetic individuals living off the welfare state and watching their lives and the world go by with comic-caustic self-irony — it's not exactly innovative.

What's new is Iceland. It makes a change to Glasgow, Paris, London and all the more usual settings for these ironic European youth movies. What is Iceland? A fog-bound volcanic island miles from anywhere, and Reykjavik, its tidy little capital is no more than a pleasant provincial center. At one point in the film, Hlynur marvels at what brought Lola to Iceland, suggesting the only reason people end up there is because they happen to be born there.

Kormakur is good at conveying the smallness of this world. The Icelanders in his film look like they're as much immersed in the quirks and dilemmas of the modern world as anyone else, but they're also a bit like bored mice in a well-oiled Nordic wheel, surrounded by great natural beauty, fed by a briskly efficient nanny of a state and going out of their minds.

The scenes of Iceland's landscapes, though not a major part of the film, are worth every second of their austere impressiveness. Any film showing Iceland is going to be a great tourist ad for the country – there are not many places in the world to see these kinds of sights.

But most of the film takes place in an enclosed, claustrophobic environment. Kormakur isn't trying to show us Iceland. Rather, he's making us imagine what it is like to be an Icelander today, running through the motions of life amidst the same small collection of places and faces, in a way that becomes as numbing as the persistent bleakness of the climate that never seems to change no matter what the season.

It just goes to show that even when you come from one of the world's natural paradises, it doesn't mean you're spared modern angst. By the way, people with space problems at home should look out for the bath that turns into a sofa – it's wonderful.