Netherlands: 'No way now for Iceland to join EU'
12.04.11 @ 09:28
BRUSSELS - Mixed messages on the status of Iceland's EU accession application are coming from different actors in the bloc. But a member of the Dutch government's Council of Economic Advisors has said that after the country's second rejection by referendum on an agreement intended to resolve a bitter banking dispute between the Hague and the small island, there is now "no way" Iceland will be able to join the European Union.
"I think at this moment there is no way to get Iceland to join the EU. In that there is no option," Sylvester Eijffinger, Tilburg University economics professor and a long-time economic advisor to the Dutch government, told Morgunbladid, Iceland's main daily newspaper.
After the Icelandic Icesave internet bank collapsed in the wake of the global economic crisis in 2008, depositors in the UK and the Netherlands were compensated by their governments to the tune of €3.8 billion. The Hague and London then demanded Reykjavik pay them back.
On Saturday (10 April), 60 percent of Icelanders voted in a referendum against a deal that reduced the interest rate demanded by the Hague and London on the debt from 5.5 percent down to 3.2 percent. However, a majority of voters feel that even this was unfair, and do not want to see any public cash at all used to pay for the mistakes of the financial sector.
"Everyone is amazed. This is the second time that there has been a disturbance to the agreement because of the involvement of the president of Iceland and the referendum result. The last contract included a very generous offer by the British and Dutch authorities," Eijffinger added.
The Dutch advisor also said that the country should "replace the president". Icelandic President Olafur Ragnar Grímsson has twice now referred deals made between Reykjavik and the Hague and London to referendums.
Meanwhile, Dutch finance minister Jan Kees de Jager on Tuesday the country's parliament that the country's EU accession depended on its repayment of the debt.
However, EU enlargement commissioner Stefan Fule and his colleague in charge of the single market, Michel Barnier, on Monday said that while the European Commission would "closely monitor" further developments regarding Iceland's "obligations deriving from membership in the European Economic Area", the vote on Saturday would not affect its EU accession process.
"The outcome of the referendum does not impact on the ongoing accession negotiations, to which the commission remains fully committed."
EU enlargement spokeswoman Natasha Butler told reporters that negotiations were proceeding apace, with 11 accession 'chapters' already screened to ensure compatibility with existing EU law.
She said the referendum result was "not an issue that will affect negotiations."
"It's in a way a bilateral issue that Iceland needs to resolve with the two member states involved."
But Butler was still unable to say whether the north Atlantic island would be able to join the EU if all negotiations had been completed successfully but the Icesave dispute was still unresolved.
The country was given the green light by the European Council last June to begin accession talks, but the Netherlands insisted that language be included in a communique from the Council affirming that the negotiations "will be aimed at Iceland ... addressing existing obligations such as those identified by the EFTA Surveillance Authority under the EEA Agreement, and other areas of weakness ... including in the area of financial services."
The European Free Trade Association Surveillance authority essentially performs the same executive role as the European Commission, but for the countries of the European Free Trade Association, the free trade body linking Iceland, Norway, Lichtenstein and Switzerland to the EU.
The language in the communique was to a large extent drafted by the Netherlands, according to sources close to the matter. The UK for its part has long been the bloc's biggest supporter of enlargement.
The EU is torn over the subject. On the one hand, the bloc needs a trouble-free Icelandic accession process to show that the Union is still an attractive entity despite its ongoing financial troubles. Still more important for the EU is the island nation's access to the Arctic with its energy wealth and transport-route potential. The bloc has no territory of its own touching the high north.
At the same time, Iceland is proving to be a bad example for other states. If the country manages to successfully get away with refusing to pay its creditors in this case, it might give ideas to other countries within the bloc who have their own cross-border debt issues.
Correction: An earlier version of this article reported that Sylvester Eijffinger advised Dutch Prime Minister Mark Rutte on the Icesave banking conflict. The professor has since clarified that while he advised the previous prime minister, he has not advised the current occupant of that office.