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25th Sep 2022

EU-Iceland talks should conclude in early 2011, commission says

  • Icelandic PM's office: The EU believes the political class was too close to the business community (Photo: European Commission)

The European Commission has recommended that the European Union move ahead with accession talks with Iceland. Should EU member states back the move, a development that is far from assured, the EU enlargement commissioner has said the process should last around 14 months.

"We will be applying the same criteria as are applied to any other country. There is no short cut," said commissioner Stefan Fuele, announcing the commission's recommendation.

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However, asked to give an approximate timeline for the process of accession talks, he said: "From the current members that recently joined that were already part of the European Economic Area, you could make your own conclusions about the challenges and the sort of framework, such as Finland and Austria. The process for them lasted plus or minus 14 months, if I remember correctly."

The European Economic Area is an agreement between the EU and Norway, Iceland and Liechtenstein that permits the three countries to participate in the EU's single market without actually joining the bloc. As a quid pro quo, the countries must adopt certain EU internal market legislation. Having already in place much of existing EU laws, countries joining the bloc from the EEA have had a much easier time acceding than other countries.

"I don't see any dramatic problems in that process ... that won't be resolved," said Mr Fuele.

The commission did note however that it would not be all smooth sailing for the north Atlantic nation.

In a surprise move, the commission said that it is concerned over the independence of the judiciary and about conflicts of interest in the political class.

"The predominance given to the minister of justice and human rights in judicial appointments... raises questions in terms of the effective independence of judges," reads the commission report.

The EU executive is also worried that following the financial crisis, "certain questions have been raised concerning possible conflicts of interest in Iceland's public life, such as close links between the political class and the business community."

"Mechanisms to reduce the scope for conflict of interests will need to be strengthened appropriately," it said.

The size of the government's deficit is also a worry, having risen to 14.4 percent of GDP in 2009, with the total public debt amounting to 130 percent. Structural reforms and fiscal consolidation to address this situation must also be undertaken.

Other issues that would also have to be resolved relate to minor changes to environment, agriculture, food safety and rural development legislation.

But the biggest stumbling block remains the Icesave dispute between the country and the UK and the Netherlands, regarding the repayment of the €3.8 billion loan London and the Hague used to compensate British and Dutch savers who lost money in October 2008 when their accounts with the online savings account Icesave were frozen, following the collapse of the parent company Landsbanki.

Icelandic citizens have balked at what they describe as the onerous terms of the current agreement, which would see every household have to contribute around €45,000 of the sum, worth around 40 percent of Iceland's GDP.

While Mr Fuele stressed that the commission was treating the tussle as a bilateral issue and separate from the EU accession process, the issue is likely to cause the country the most trouble in winning over the EU Council.

A UK government spokesperson said: "The UK fully supports Iceland's application to join the EU. The accession process is based on strict criteria that Iceland - like all candidate states - will have to meet."

The spokesperson underscored that it is essential that Iceland meet its EEA obligations, one of which is the Deposit Guarantee Directive.

"The UK, along with every other member state, will now need to consider the commission's recommendation carefully before deciding whether to open accession negotiations."

"A satisfactory resolution of the Icesave issue is necessary to rebuild confidence of the international financial community, aid the recovery of the Icelandic economy and enable Iceland to meet the criteria and obligations for EU membership."

An EU diplomat told EUobserver that there are "different thoughts around the EU about the timeline," adding that the next time the EU Council could discuss whether to give Iceland its blessing would be the spring EU summit at the end of March, "a very tight deadline."

"There's also the Icesave referendum in a few days' time. That could change things, and we don't know the result of that."

For Icelanders, fisheries will perhaps be an even bigger stumbling block. The commission said on Wednesday that blocking access to Icelandic fisheries is a redline, as Iceland does not allow non-Icelanders to fish in its waters and restricts access to its ports to foreign vessels. Foreigners also cannot own more than a minority share in fishing companies.

All of this must be done away with before Iceland can join the bloc. Icelanders for their part are fiercely proud of a fishery that has not been struck by as much overfishing as EU waters have and such a move is unlikely to be popular.

Jon Baldvin, a former foreign minister and the man who led Iceland's delegation during the formation of the European Economic Area, told EUobserver: "Iceland will never join if we have to allow access to our fishing stock. Icelanders will view this as nothing less than the arrival of the Spanish Armada."

"We are the teacher here and the EU is the pupil, not the other way round," he said.

Mr Baldvin, one of Iceland's biggest supporters of joining the EU, also said that demands for further fiscal consolidation was unlikely to be popular.

"We are already undergoing on of the most drastic fiscal reorganisations any country could go through, with a quarter to a third of budgetary outlays going entirely to servicing our debts, cutting social expenditure to the bone. This will not go down well."

Separately, commissioner Fuele suggested that if Iceland accede to the EU, it may be time for the other members of the EEA, Norway and Lichtenstein to join the bloc. "Maybe these countries will take the current development to think about similar steps to upgrading their relationships with the EU."

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