The troubled island nation, devastated by economic collapse, could make a fast-track entry to the European Union if it applies for membership
The small North Atlantic state of Iceland could become a member of the EU within the next two years if it takes the step of formally applying for membership of the 27-nation bloc.
EU enlargement commissioner Olli Rehn has indicated that the EU would look favourably upon a membership application and would be prepared to make it an EU member within record time, probably at the same time as Croatia in 2011.
"The EU prefers two countries joining at the same time rather than individually. If Iceland applies shortly and the negotiations are rapid, Croatia and Iceland could join the EU in parallel," said Mr Rehn, according to UK daily the Guardian.
"On Iceland, I hope I will be busier. It is one of the oldest democracies in the world and its strategic and economic positions would be an asset to the EU," he continued.
The encouraging words from the EU come as Iceland grapples with financial meltdown caused by the global economic crisis.
The government last week became the first to fall due to the global economic situation after weeks of demonstrations in Reykjavik as people's savings and pensions eroded. The country has also had a bailout by the International Monetary Fund.
Elections are expected to be held in May. Until then, the country is expected to be led by a caretaker centre-left government of Social Democrats, the senior coalition partner, and the more eurosceptic Left-Greens.
While the Social Democrats generally favour EU membership, the Left-Greens party "rejects participation in the European Union and emphasizes simple, bilateral treaties concerning trade and co-operation," according to its website.
Finnur Dellsen, a political advisor in the Left-Green party, told EUobserver that his party wants a referendum on whether to open negotiation talks with the EU and then another one on actual membership.
But he noted that EU question is "not really a part" of the current negotiations on forming a government.
However, the question of membership is expected to feature strongly in pre-election campaigning, as will the issue of whether the battered Icelandic Krona should be replaced by the euro.
Icelanders themselves remain unsure of EU membership. A recent Capacent Gallup poll found that 38 percent want to join the EU, down from over 50 percent in October.
Speaking about possible EU membership, European Commission president Jose Manuel Barroso on Friday (30 January) did not reject the idea.
"Iceland is a very friendly country - a member of the European economic space."