Iceland, join the EU

Iceland belongs in the European Union. Although a long way from continental Europe, it is clearly a European country, with a Scandinavian Christian heritage, a stable liberal democracy and a developed economy. For the EU, Icelandic membership would be a natural extension of the existing union, balancing its expansion eastwards. Icelandic entry would pose very few problems of assimilation compared to the much larger and poorer former-communist-states that joined in 2004. For Iceland, EU membership would provide it with a welcoming home and a source of economic stability. As a member of one of the most powerful international blocs, Iceland would also be in a stronger position to participate in future global efforts on climate change, financial and trade reform, and international security and development initiatives.

Iceland needs to join the EU because of the economic crisis (“kreppa”) in which it finds itself, creating an emergency situation. Although Iceland appeared to benefit hugely from globalisation, with its biggest banks and companies expanding aggressively abroad, the global recession has shown that small, open economies are unable to survive outside strong economic blocs such as the EU. While Iceland’s economy has been devastated, with GDP set to shrink by 10% in 2009, similar small states such as Belgium and Ireland have weathered the storm much better within the shelter of the EU. Part of this has to do with the confidence of international markets in the EU, as well as the greater economic integration they have within the enormous single market. But it is also due to the strong regulatory framework provided by EU institutions that prevented their economic excesses reaching the same proportions as those of Iceland.

Icelandic sovereignty is already something of a myth – the economic crisis shows how little freedom of action a small nation really has today. The country does participate in the European Economic Area (EEA), giving it open access to the EU market. This already requires it to share sovereignty by accepting three-quarters of the EU’s regulations, even though it plays no part at Brussels in shaping these (Norwegians call this “government by fax”). Iceland even contributes financially to the EU’s social and cohesion funds. So it is only a very small step for Iceland to become a member state and participate fully in the European Union. Far from giving up its autonomy, membership of the EU would give it influence in Brussels over the rules and policies it must already follow.

The issue of fishing should not prevent Iceland joining the EU. Today it is a smaller part of Iceland’s economy, only employing a fraction of its workforce, so it would be wrong for the fishing lobby to hold the country’s future hostage to its own interests. In any case, the EU’s Common Fisheries Policy is changing, allowing more decision-making at a local level and providing more protection for endangered stocks. Iceland’s entry would actually help to accelerate this trend, as existing members such as the UK and Ireland are already sympathetic to revision of the Common Fisheries Policy.

Nor is whaling not a deal-breaker. The last hunt was in 2006 so it clearly has little or no economic significance. The rise of environmental tourism has made whale-watching trips more lucrative anyway, so it is already in Iceland’s interest to join the rest of the EU (and almost all the other countries in the world) in abandoning whaling.

Iceland needs to adopt the Euro in order to bring stability to its economy. The financial crisis has caused the value of the Icelandic krona to collapse and led to high interest rates, ruining all of Iceland’s banks and most of its businesses. And in the good times many of Iceland’s citizens took out loans in foreign currencies like the Euro which they cannot now afford to repay. Savings and pensions have likewise become worthless. Swapping the krona for the Euro would provide shelter from the economic storm, allowing normal trade and investment decisions to resume and bringing interest rates down to ease pressure on ordinary citizens. As adopting the Euro is only possible for EU member states, Iceland should seek membership as quickly as possible.

Allowing an EU member to adopt the Euro is as much a political decision as a strictly economic one, and apparently rigid criteria have previously been bent. This means Iceland could seek assurances on rapid Euro-entry as part of its entry negotiations. And even if Iceland cannot ditch the krona for the Euro immediately upon entry, but has to wait a couple of years in order to meet the ECB’s formal criteria, the prospect of eurozone membership will still reassure the markets and contribute hugely to an easing of the economic pressures upon Iceland.