Iceland: On the Verge of Withdrawing its EU Accession Application?

07-03-2014

Iceland's application for EU membership, launched in the aftermath of the financial crisis, is today at a turning point. A new government, elected in April 2013, has presented the country’s parliament with a proposal to withdraw the accession application. While the move has triggered protests and petitions against the proposal, the government has also rejected a widely requested referendum on whether to pursue accession. The government’s position reflects two thorny issues in the bilateral relationship: the 'mackerel war' – in which the EU has argued that Iceland has overfished the mackerel in Icelandic waters – and Iceland’s refusal to reimburse the British and Dutch depositors holding accounts with Icelandic banks before the banks collapsed. Iceland's position, which favoured domestic over foreign depositors, was backed in January 2013 by a decision issued by the European Free Trade Area (EFTA) court. The new government in Reykjavik may also be sensitive to more general concerns about EU membership and the adoption of the euro. The small Nordic country has largely recovered from its deep economic crisis, thanks to a devalued currency and a strong trade surplus – a turnaround made possible in part by the country's distance from the euro area.

Iceland's application for EU membership, launched in the aftermath of the financial crisis, is today at a turning point. A new government, elected in April 2013, has presented the country’s parliament with a proposal to withdraw the accession application. While the move has triggered protests and petitions against the proposal, the government has also rejected a widely requested referendum on whether to pursue accession. The government’s position reflects two thorny issues in the bilateral relationship: the 'mackerel war' – in which the EU has argued that Iceland has overfished the mackerel in Icelandic waters – and Iceland’s refusal to reimburse the British and Dutch depositors holding accounts with Icelandic banks before the banks collapsed. Iceland's position, which favoured domestic over foreign depositors, was backed in January 2013 by a decision issued by the European Free Trade Area (EFTA) court. The new government in Reykjavik may also be sensitive to more general concerns about EU membership and the adoption of the euro. The small Nordic country has largely recovered from its deep economic crisis, thanks to a devalued currency and a strong trade surplus – a turnaround made possible in part by the country's distance from the euro area.