Johanna Sigurdardottir, Iceland prime minister
Brynjar Gauti/ AP
Prime Minister Johanna Sigurdardottir after party negotiations in Reykjavik, Iceland, Jan. 28, 2009.

Iceland Prepares to Join EU Amid Economic Instability

July 17, 2009 07:00 PM
by Shannon Firth
After several days of fierce discussion, Iceland’s parliament has decided to apply to the European Union—a decision largely motivated by the nation’s economic troubles and frail currency.

Icelandic Government to Pursue EU Talks

On July 16, Iceland’s parliament voted 33 to 28 in support of the requested application, although two MPs declined to vote, reported Reuters.

Prime Minister Johanna Sigurdardottir, an openly gay social democrat, was pleased, calling the decision “the most historic vote in the history of our parliament,” reported Time.

The nation's previous prime minister, the conservative Geir Haarde, resigned in January, just months after the financial collapse.

Iceland’s government will submit a request for EU status to the European commission in Brussels later this month, explained Reuters. If approved by the committee, the people of Iceland will make the final decision on membership through a referendum.

However, before the referendum can be issued, the government will have to agree with the EU on the terms of its membership. These negotiations could take about two years, reported Iceland News.

Einar Mar Thordarson, a political scientist, said Iceland may try to switch to the euro right away if it can be excused from the exchange-rate mechanism, which Bloomberg described as “a pre-adoption test of currency stability.”

“[This] would allow for the krona to be pegged to the euro bringing about stability and shelter at the European Central Bank,” Thordarson told Bloomberg.
Leo Cendrowicz, a writer for Time, says that officials in Reykjavik have abandoned the idea of “unilateral euroization." However, because two-thirds of Iceland’s laws parallel those of the EU, “Iceland could leapfrog other wannabe members in the EU queue such as Albania and Turkey," Cendrowicz argues.

In May, a Gallup poll found that 39 percent of Icelanders support joining the EU and 38.6 percent rejected the idea, reported Bloomberg.

One of the largest obstacles to joining the European Union is the impact the move will have on the fishing industry. According to France 24, the fishing industry comprises 7 percent of the county’s GDP and the bulk of the nation’s exports.

Most workers in the fishing industry worry about having to cede their authority to the European Commission, reported France 24. “[W]e should be able to control our own waters,” said Sigurdur Sverrisson, president of the Icelandic Federation of Fishing Boat Owners.

Edda Ros Karlsdottir, an economist for the Central Bank of Iceland, knows membership isn’t a “magic wand,” but she argues it would provide an avenue to international markets. “Above all we will have a stable currency,” Ros Karlsdottir added.

News hounds outside Iceland have also weighed in. Beacon, a British reader of IceNews, warned of “mass immigration,” and that Iceland’s parliament would lose “any real power.” The reader added, “This is like taking a healthy body and deliberately injecting it with poison … It is State suicide.”

NEXT: Did the United Kingdom Help Sink Iceland’s Economy? >

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