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Iceland and the European Union

The relationship between Iceland and the European Union is currently defined through Iceland's membership of the European Economic Area, which allows the country access to the single market of the European Union (EU).

Background

Iceland has never applied for membership. Iceland is, however, a member of the European Free Trade Association (EFTA), along with Norway, Switzerland and Liechtenstein. In 1994 Iceland and its EFTA partners (except for Switzerland, which rejected the agreement in a referendum) signed the European Economic Area (EEA) agreement with the European Union, which was designed to allow the EFTA countries to participate in the European Single Market without having to join the EU. The EFTA Secretariat in Brussels reported in 2005 that Iceland had adopted approximately 6.5% of EU regulations as a result of signing the EEA agreement.

Membership issues

The most contentious issue regarding possible EU membership for Iceland is the loss of control over natural resources, notably fishing grounds due to the Union's Common Fisheries Policy.

Opponents also point to the good performance of the Icelandic economy until recently, high growth and low unemployment, as a sign that there is no pressing need to join the EU. It is commonly argued that the membership of EEA already brings most of the potential benefits of an EU-membership without the costs. Then there are those who view the EEA membership as costly and the experience with the EEA as a negative one and therefore oppose EU-membership. Unwillingness to hand over a part of Iceland's sovereignty to a supranational organization is another source of opposition to EU membership, as in other European countries.

Proponents of EU membership largely rely on economic arguments: they view the euro as a solution to the dramatic exchange rate fluctuations of the króna, which have posed a challenge for many Icelandic export businesses. It is also pointed out that Iceland has Europe's highest grocery prices and completely opening the Icelandic market to EU products might result in lower prices. Former Foreign Minister Valgerður Sverrisdóttir said in an interview with Iceland Radio that she seriously wishes to look into whether Iceland can join the euro without being a member of the 27-nation EU, according to Norwegian news NRK. Valgerður believes it is difficult to maintain an independent currency in a small economy on the open European market. (Montenegro has already unilaterally adopted the Euro , and it is used de facto in Kosovo.)

Government opinion

The former coalition government of Iceland, consisting of the conservative Independence Party (Sjálfstæðisflokkurinn) and the liberal Progressive Party (Framsóknarflokkurinn), was against joining the EU. The Social Democratic Alliance (Samfylkingin) is in favour of membership negotiations resulting in a deal which would then be submitted to a referendum. Following the 2007 election, the Independence Party and the Social Democratic Alliance entered a new coalition. The policy of the government is not to apply for EU membership. On the other hand it has set up a special committee to monitor the development within the EU and suggest ways to respond to that.

Former Prime Minister Halldór Ásgrímsson, seems to be in favour of joining the EU, and predicted on 8 February 2006 that the country will join the EU by 2015. He added that the decisive factor will be the future and the size of the eurozone, especially whether Denmark, Sweden and the UK have joined the euro or not. His prediction, however, did not receive much support in Iceland; instead, it received much criticism, not the least from people within his own government.

The current Prime Minister, Geir H. Haarde, has on a number of occasions stated his opposition to EU membership, both as Foreign Minister under Ásgrímsson and after taking office as Prime Minister. In response to Halldór Ásgrímsson’s earlier prediction Haarde said: "I don't share that point of view. Our policy is not to join in the foreseeable future. We are not even exploring membership." Further in a speech at a conference at the University of Iceland on 31 March 2006, Geir Haarde repeated what he had said on a number of occasions that no special Icelandic interests demanded membership of the EU. In the same speech he further explained in detail why it would not be in the interest of Iceland to adopt the euro.

At a meeting with members of his party on 17 May 2008 Haarde said he believed the cost of joining the EU simply outweighed the benefits to his opinion and therefore he was not in favour of membership.

In October 2008, during talks to repatriate a portion of Iceland's foreign invested pension funds (Iceland having been particularly hard hit by the Liquidity crisis of September 2008) the unions demanded that Iceland apply for EU membership in return for wage restraint.

Public opinion

An opinion poll on the matter conducted in August 2005 (after the rejection of the proposed European Constitution in France and the Netherlands) showed that 43% of respondents were in favour of EU membership while 37% were against, 20% were undecided. When asked whether Iceland should start membership negotiations, 55% were in favour while 30% were against. 54% of respondents were against adopting the euro while 37% were in favour. A poll produced on 18 February 2006 (after the prime minister's prediction) by the newspaper Fréttablaðið found 42% opposed to applying for EU membership while 34% were in favour. A new extensive poll, released on 11 september 2007, by Capacent Gallup showed that 48% of respondents were in favour of EU membership while 34% opposed. Furthermore a whole 58.6% wanted to begin admission negotiations with EU while only 26.4% opposed, and 53% were in favour of adopting the euro, 37% opposed and 10% undecided. The poll also showed that supporters of the 4 biggest political parties in Iceland, were all in favour of starting admission negotiations in a "clean" majority, that is to say more were in favour of negotiations than those who opposed and those who were undecided combined.

Another poll from February 2008 again showed a clear majority in favour of membership negotiations; more than half of those asked stated the situation was more favourable for membership than a year ago. According to the same poll 55.1 percent of the people want Iceland to apply for EU membership while 44.9 percent say they are against joining the union. Support for EU membership has increased by 19 percent since January 2007.

Euro

Due to the small currency Iceland has the government has explored if it is possible to adopt the Euro without joining the European Union, the EU rejects this as it would not allow Iceland to join the monetery union without joining as a full member state. However, Andorra and other non-EU nations have been allowed to adopt the currency without joining the EU itself, though they have no influence over the European Central Bank. Montenegro, which has adopted the Euro unilaterally is in the same position. Whether Iceland would agree to using the Euro without any influence over interest rates and the like is unlikely.

References

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