Plans to build a new road in Iceland ran into trouble recently when campaigners warned that it would disturb elves living in its path. Construction work had to be stopped while a solution was found.

From his desk at the Icelandic highways department in Reykjavik, Petur Matthiasson smiles at me warmly from behind his glasses, but firmly.

"Let's get this straight before we start - I do not believe in elves," he says.

I raise my eyebrows slightly and incline my head towards his computer screen which is displaying the plans for a new road in a neighbouring town. There are two yellow circles marked on the plans, one that reads Elf Church and another that reads Elf Chapel. Petur sighs.

"Ok," he acknowledges wearily. "But it's not every day in Iceland that we divert roads for elves. It's just in this case we were warned that elves were living in some of the rocks in the path of the road - well, we have to respect that belief." He grins shyly and picks up his car keys.