EU's Window of Opportunity Closed on Iceland?

On Sunday, Iceland's new social-democrat Prime Minister Jóhanna Sigurðardóttir was sworn in after eighteen years of conservative government on the island. She is the first female Prime Minister on Iceland, the world's first lesbian government leader and will lead a leftist minority cabinet at least until the elections of 25 April. She announced that a special parliamentary commission will be set up to consider EU membership, with the delivery date for its report set to 15 April, ten days before the next elections. She reassured at the same time that Iceland won't join the union without a referendum first.

It is amazing how the EU has been able to ruin its golden opportunity to let Iceland become a member of the union over the past few weeks. As I reported earlier, before Christmas the island found itself in such a dreadful situation that it probably would have joined the European Union on the spot if it had been offered the euro at the same time. In a video conference, the European Commissioner for Enlargement Olli Rehn even offered a fast-track handling of an Icelandic membership application, but remained rather unclear about when the island would be allowed to adopt the European common currency. It has become clear by now, however, that the European Union will not accept any exceptions to its own rules, and Iceland will have to wait for at least two years after its admission to the EU before it can join the Eurozone, just like any other country, that is, if it is financially stable by then. Of course, this makes EU membership a completely pointless option for Iceland, since the island is desperately looking for a solution to its awful monetary financial situation, and not exactly to, say, such an overpopulation of fish in its coastal waters that it needs Spanish and Portuguese fisherman to come to the rescue immediately. One could say that basically, the European Union is offering Iceland a swimming vest if it first gives up everything it owns and then can prove that it doesn't need the swimming vest in the first place by swimming to the shore on its own for at least a couple of times.

Many of the islanders are therefore realizing that the European Union isn't the solution to their problem, and recent opinion polls suggest that support for EU membership has dropped again to the levels from the times before the current financial crisis hit Iceland. They also indicate more support for the left, which makes Iceland in fact somewhat unique in a European context. The far-left anti-EU Green-Left Movement (Vinstrihreyfingin-grænt framboð) in particular has seen a dramatic uprise in its support among the population, and this is clearly one of the reasons why the party entered the government last week.

But while the EU seems to be doing almost everything wrong to win the minds of the Icelanders, other solutions are being discussed, and some even offered from abroad. One solution would be to tie the Icelandic krone not to the euro, but to the US dollar or the Swiss franc. At best, these two countries would be flattered – at worst, they probably couldn't care less. A more interesting option would be, as proposed by the Green-Left Movement's leader and new Minister of Finance Steingrímur J. Sigfússon, to use the Norwegian krone on Iceland. In fact, Norway's Minister of Communication Liv Signe Navarsete from the Center Party (Senterpartiet, Sp) said in a reaction that she was very positive to the proposal, and added that it's Norway's duty to help Iceland in a difficult situation. In fact, she was quoted saying that «nobody should be forced into the EU and the Eurozone because of economical problems,» but as the Norwegian financial paper Dagens Næringsliv remarked, it was unclear whether her offer was available to countries like the Ukraine, Croatia, Serbia or Turkey too. Norwegian Minister of Finance Kristin Halvorsen, from Green-Left Movement's Norwegian sister-party Socialist Left Party (Sosialistisk Venstreparti, SV), rejected the idea fiercely only one year ago, but seems to have changed her mind now.

Norway's offer for a monetary cooperation between Norway and Iceland is to be taken serious. The advantages for Iceland are clear: this would be an easy way out of the current financial problems for the island without losing its national bank, even though some services would be taken over by Norway's Central Bank. In addition, Iceland would not be forced into the EU. But let's not forget the advantages such a solution would bring to Norway: first of all, it would keep Iceland out of the EU, thus keeping the EEA alive. And it would also strengthen Norway's position in the Arctic and Barents Sea, something not only the EU but also the US, Canada and maybe most of all Russia should worry about.

It's already clear that the coming months and weeks will be deciding not only for the future of Iceland, but also for Norway and the other countries around the Arctic circle. Let's hope the people of Iceland can keep their heads clear and make the right decision when they go to the ballot boxes on 25 April.

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Will Iceland Join the EU in 2009?

European Commissioner for Enlargement Olli Rehn said earlier this month during a videoconference with Reykjavik from Oslo that the European Commission is already mentally preparing for a membership application from Iceland, and that a rapid treatment of the application could not be excluded. He mentioned specifically that the island could become a member of the European Union already before the end of 2009, even before Croatia.

Iceland came in serious financial difficulties this year as a result of the global banking crisis, which made the banking sector on the island collapse completely. One of the side effects of that collapse has been that the Icelandic crown's value has fallen like a brick, hitting a large part of the population, even those who didn't actively participate in the island's banking adventure. It's not uncommon on the island to have the loan for the house or the car in foreign currency, primarily the euro, and some islanders found themselves these last months paying more on interests on their loans than they earn in a month's time. Even those who didn't take loans in foreign currencies were hit by the crisis, because local interest rates went completely through the roof, and fixed interest rates on loans are virtually an unknown concept in the country. As a consequence, several demonstrations took place in the local capital Reykjavik in November and December, some of them even ending in riots, a rarity on the island, even though we're still far away from Greek-anarchic style “demonstrations”. It is worth noting though that some of the demonstrations mobilized as many as several thousands of protesters, a significant number considering there live only 300,000 people on Iceland.

The island is a member of NAtO, EftA, EEA and the Schengen Area, but has so far kept itself outside the European Union. Opinion polls have always shown a large opposition against EU membership, and therefore Iceland is the only Nordic country that hasn't even organized a referendum on EU membership. One of the reasons why Iceland never has wanted to join the EU are the rich fishing grounds around the island, but recently the strong and very expansive banking sector became an argument too. Now that the latter has collapsed completely, the argument has disappeared too, and the EU wind on the island has shifted direction radically. According to the latest opinion polls, there would now be a large majority favoring accession to the EU.

This shift in opinion is the reason why former Icelandic Minister of Foreign Affairs Jón Baldvin Hannibalsson directly asked European Commissioner Olli Rehn during the video conference how soon Iceland could become a member of the EU. The island is in an emergency situation, and therefore needs an emergency solution. The response of Olli Regn was remarkably direct too: according to him, Iceland could count on an express treatment, if it were to apply, and join the Union already during 2009 – and the same applies for Norway too, he added. Other countries, like e.g. Croatia, have to exercise much more patience to become an EU member, and may have to see how Iceland is allowed to take a shortcut right before their nose. Both Iceland and Norway are already members of the EEA, and about three quarters of EU legislation is therefore already in place in the two Nordic countries, Olli Rehn cited as the reason why he thinks an integration into the EU would be so easy to complete.

But is that really the only reason? Obviously, having such a large part of the legislation already in place does play a big role, but the advantages an Icelandic and Norwegian EU membership would bring to the EU probably play an even bigger role. The banking sector on Iceland lays in ruins today and the island is virtually bankrupt, but it's not like the country has become an underdeveloped country, or would become in the near future. Chances are it would become a net payer to the EU within a relatively short period, certainly when compared to countries like, say, Bulgaria, Croatia, or… well, even Spain or Portugal. And by the way, now that we're talking about those two last countries, their governments probably already calculated and checked once again exactly how much cod and other fish their fishermen would be allowed to capture in the Icelandic waters would the island become an EU member. If it were up to them, Iceland could probably join the EU already next week if it's already too late to let it join the Union before the end of this week. Sure enough, the EU might try to sell the story about the express treatment of Iceland's EU membership application as one about mercy and sympathy for the poor island up in the North, but it's better to put not too much faith in it.

In fact, I'd rather like to warn the population and the government on Iceland against rushing into an EU membership to solve a short term problem. Negotiations will show whether Iceland will be allowed at all to join the Eurozone on the same day it joins the European Union. I'm afraid though that in the “best” case, Iceland will be able to trade in its fishing grounds for an immediate introduction of the euro on the island, but in the worst case, it will be confronted with an “armada” of Spanish and Portuguese fisherman catching all the cod in their waters, without even having the right to protest against it, at the same time as it is being denied admission to the Eurozone before the country is financially completely back on its feet. In that case, it will be a very unpleasant awakening from the current Icelandic nightmare in a few months or years from now.

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