Iceland Advances EU Entry Bid: Domestic Opposition Mounts

The European Union moved closer toward accepting Iceland as a member, just an Icelandic parliamentary committee seized on mounting anti-EU sentiment by seeking to put the entry process on hold.

Today’s recommendation by the parliament’s foreign- relations committee in Reykjavik came less than two hours after Iceland made strides toward the EU at a negotiating session in Brussels. The North Atlantic island nation has now opened talks in 27 of the EU’s 35 policy areas and completed 11.

Iceland’s current coalition wants to advance further toward the EU, even as polls show growing hostility to entry and give the nod to opposition parties in balloting set for late April. Foreign Minister Ossur Skarphedinsson didn’t rule out a pre- election pause in the EU talks to avoid inflaming public opinion.

“What I think is correct for Iceland to do now is consolidate what we have achieved so far,” Skarphedinsson told reporters in Brussels. He said “it remains to be seen” whether the next step toward the EU will come before the April 27 vote.

Iceland’s government sought EU entry after the economy cratered in 2008, with banks defaulting on $85 billion and the krona plunging as much as 80 percent against the euro. As the EU battles to rescue the euro zone from the debt crisis, Iceland has roared back from its financial collapse, leading the 320,000 Icelanders to question the logic of joining.

Economic Growth

Recovery since late 2010, thanks to an International Monetary Fund loan and capital controls, coincided with the deepening of the euro crisis. Iceland’s economy grew 3.5 percent in the third quarter, compared to a 0.1 percent contraction in the euro area.

Iceland’s brighter economic prospects have dimmed the EU’s allure. A majority of Icelanders, 53.5 percent, now want to drop the entry bid, according to a Capacent Gallup poll published last month. Some 36.4 percent want to join and 9.9 percent were undecided.

The next government may reflect the popular mood. Prime Minister Johanna Sigurdardottir isn’t running and her Social Democrats, the leader of the current coalition, are alone among Iceland’s parties in aiming for EU membership. Two of the largest opposition parties, the Independence Party and the Progressive Party, have threatened to call off the entry bid if voted into power.

Common Sense

The two anti-EU parties lured a member of the Left Green Party into backing a motion to suspend the membership talks in the foreign relations committee today. The panel will decide on Dec. 20 whether to put the motion before the full parliament.

Skarphedinsson, a Social Democrat, said there are powerful incentives for Iceland to enter the EU and adopt the euro.

“I have the utmost belief in the common sense of the Icelandic people, despite the politicians we sometimes elect,” he said. “When the euro has emerged from its present woes, which I believe it is starting to do, it would be a wise thing for the Icelanders to adopt the euro.”

Discussions about the legislative setup for the euro got under way today, along with talks in five other EU policy areas. The other areas were: free movement of goods, taxation, regional affairs, environment and foreign relations. Iceland also completed talks on competition policy.

Skarphedinsson said the “best minds” of the EU, the IMF and Iceland are poring over how to dismantle the capital controls, key to EU entry and the future adoption of the euro. He gave no scenario or timetable for lifting the restrictions.

‘Big Mammal’

Iceland already observes EU single-market rules and has dropped passport checks on travelers from most EU countries, smoothing the first 18 months of the entry talks. Both sides said today that the next phase will be tougher, with the focus on the euro, environment policy and farming and fishery policy.

Getting Iceland to follow EU policies on climate change and nature protection is “the big mammal in the room,” EU Enlargement Commissioner Stefan Fule. “Those two areas will require further consideration.”

Then there is what Skarphedinsson called “the little matter of whales” -- a reference to Iceland’s whale-hunting tradition, a practice that is banned in the EU.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Omar R. Valdimarsson in Reykjavik at valdimarsson@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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