Hodgson stepped down after the defeat saw his team knocked out of Euro 2016.
“My contract was always going to be up after this tournament. I would have loved to have stayed on another two years, but now it is time for someone else to take over this group of players,” Hodgson said.
England got off to a dream start when Raheem Sterling was brought down by goalkeeper Hannes Halldorsson and Wayne Rooney confidently thumped home the penalty in the fourth minute.
Ragnar Sigurdsson equalised within two minutes for Iceland, turning the ball in at the far post after Aron Gunnarson’s massive throw-in was headed into his path by Kari Arnason.
Iceland then went ahead in the 18th minute when an intricate exchange of passes on the edge of the area ended with Kolbeinn Sigthorsson scoring with a low shot that goalkeeper Joe Hart got a hand to but could not stop from rolling into the net.
Shell-shocked England never recovered and slumped to one of the most embarrassing defeats in their soccer history.
Iceland, with a population of just over 330,000, is the smallest country ever to appear in a major tournament and the team’s reward is a quarter-final against hosts France in Paris on Sunday – with the prize for the winner a semi-final against European heavyweights Germany or Italy.
England will be watching from home – again – after a defeat that extends their miserable run in the Euros where they have won one knockout match, on penalties at home to Spain in 1996.
Former England players and the country’s media lined up to savage the national football team, with the Daily Mail bellowing”Good Riddance” on its back page.
The Daily Express needed just one word, “Clueless”, while the normally more measured Daily Telegraph simply stated: “England’s greatest humiliation”.
The poetry was wasted on no-one: just days after Britons voted to leave the European Union in a referendum that sent shockwaves around the world, England’s footballers managed to deliver a European exit of their own in Nice.
Some observers said this was England’s worse result since losing to the US in the World Cup in 1950, while others pointed to their thrashing by Hungary in 1954.
A joke immediately spread about a petition being set up to have the match replayed, referring to the petition more than 2.4 million Britons have signed on parliament’s website calling for a second EU referendum.
Many jokers were suggesting Roy Hodgson should take over from the outgoing David Cameron as Britain’s Prime Minister “as he would be the perfect man to lead the country out of Europe”.
Just as Cameron said he would step down following the Brexit vote, Hodgson resigned in the aftermath of England’s defeat.
“England beaten by a country with more volcanoes than professional footballers. Well played, Iceland,” tweeted former striker Gary Lineker.
The worst defeat in our history. England beaten by a country with more volcanoes than professional footballers. Well played Iceland.
— Gary Lineker (@GaryLineker) June 27, 2016
Roy Hodgson resigns as England manager. A decent and dignified man but will forever be remembered for losing to tiny Iceland.
— Gary Lineker (@GaryLineker) June 27, 2016
He was joined by a number of former England players in eviscerating Hodgson’s players.
“England – pathetic, shocking, inept,” was Alan Shearer’s verdict.
Former Arsenal and England striker Ian Wright joined the chorus of discontent.
“Someone was waiting for someone else to do something. They were petrified,” he said.
England – Shocking. Pathetic. Inept. Well done Iceland, you were brilliant. #ENGICE #EURO2016
— Alan Shearer (@alanshearer) June 27, 2016
Meanwhile, Spain may have been inferior in their overnight 2-0 loss to Italy in the last 16 but their exit isn’t the end of an era, according to coach Vicente Del Bosque.
Spain had dominated European football since 2008, winning two Euros and a World Cup in between, but were outshone by a clinical Italy at the Stade de France.
“I don’t think an era has finished but we understand how difficult it is to win a major championship,” Del Bosque told reporters.
“Spanish football has a great structure and we’ve been working for many years on it. We have a good youth academy and good young players.”
Proving that point, Spanish teams have ruled in European club competition with Real Madrid and Sevilla winning the Champions League and Europa League respectively this year.
But Del Bosque, whose side had not lost to Italy in a competitive match since 1994, said their confidence was hit by the last-gasp 2-1 loss to Croatia in their final group game.
“We played two good games and the third one was not too bad but the last-minute goal did us damage,” he said.
Del Bosque declined to say if he would continue as Spain coach, although he added his immediate future would be discussed with the president of the Spanish football federation.
“We were a bit timid and didn’t play with enough bravery and decisiveness. We took more risks but couldn’t equalise,” he said.
Del Bosque added that work would start now to turn things around and Spain would be able to get their revenge when they face Italy in the 2018 World Cup qualifiers from September.
“The Italians played well and were very effective. It’s a difficult style of football to play against and they deserved to be in last eight,” he said.
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