Europe Programme - [10/16/2009]

Iceland and the EU: the road ahead. European Breakfast with Jón Baldvin Hannibalsson, ex-Minister of Foreign Affairs and International Trade of Iceland

“We need the European Union because we cannot solve our problems on our own”

Iceland, which is experiencing the worst economic crisis of its history, applied for entry into the European Union last May. Speaking at a CIDOB "European Breakfast", Iceland’s Ex-Minister of Foreign Affairs Jón Baldvin Hannibalsson, who in the late 1980s negotiated an agreement with the EU that gave the country access to the single market, analysed the relationship of mutual interest that the entry of a new Scandinavian member would have for Europe. He stressed the importance of the debate for the Spanish government, given that the commencement of negotiations could coincide with Spain's presidency of the Council at the beginning of next year.

One of the unexpected consequences of the crisis has been the way that Iceland has moved closer to the European Union. Hannibalsson emphasised the existence of two obstacles that might hinder this rapprochement from resulting in Iceland's joining the EU, giving the example of another non-EU member Scandinavian country – Norway – which failed in the same attempt on two occasions. The first obstacle is the lack of political consensus in a country which, after only having recovered its independence 50 years ago, sees its autonomy endangered once again by the giant of European trade. Hannibalsson described the current "Icelandic political paradox", in which the government of Prime Minister Jóhanna Sigurdardóttir is a minority alliance of Social Democrats, pro-Europeists and the green left party, and which is strongly opposed to Iceland's candidacy given that it considers that joining the EU would result in a loss of national control over fishing resources. And in effect, this is the issue that will be hanging over the negotiations – "maintaining control of a resource that is vital for Iceland's economy". Because the huge fishing areas in Iceland's waters now represent 80% of the country's economy, and the “Cod Wars” with Great Britain in the 1970s over fishing rights in the North Atlantic are still part of recent memory.

The EU and Iceland: a relationship of mutual interest?

The Icelandic ex-Minister of Foreign Affairs knows full well the difficulties involved in the negotiations, the commencement of which (if the Council gives the expected "green light" in December) could coincide with Spain's presidency of the EU in early 2010. In the late 1980s, Hannibalsson negotiated the agreement for Iceland's entry into the European Economic Area. Such an agreement offered access to the European single market, the members of which collectively formed the European Free Trade Association (Norway, Liechtenstein), apart from Switzerland. Thanks to this agreement, Iceland's entry into the EU could (from a technical point of view) be completed quickly, given that only nine of the 35 chapters are pending. This is an issue that has raised mistrust among Balkan countries (Macedonia and Croatia) that have been waiting to enter the EU for five years. Nevertheless, the negotiations could run into difficulty, as one of the pending issues is the Common Fishing Policy, one that is fundamental for Iceland. According to the Icelandic politician, the EU represents not only an option of immediate necessity (given that Iceland needs partners and experts that can help to return confidence in the country among international investors); it is also the only alternative that can guarantee stability and well-being over the long term. Therefore, in the wake of this profound crisis, "Iceland cannot solve the problems that it is facing by itself".

In Hannibalsson's opinion, Iceland’s joining the EU will not only bring advantages for the new member; he also envisions geopolitical income for the whole continent. The melting of the Arctic ice cap owing to global warming means that the nautical chart of politics is being redrawn. New maritime trade routes with North America and East Asia will change the economic balance over the coming decade. Furthermore, the enormous natural resources hidden beneath the ice cap place Iceland and the other Scandinavian countries in an excellent position, owing to their direct access, and the European Union will be able to take advantage of this in order to counteract its energy dependency on Russia.

The time to assume responsibility

Iceland, which experienced a decade of unprecedented well-being with the boom of investment banks, is now suffering from the worst crisis in its history, with the collapse of its banking system and the devaluation of the Icelandic crown to half its value in early 2007. Hannibalsson said that the crisis was not only economic but institutional and political, as it derived from the failure of the government, the central bank and the other institutions that should have been looking after the interests and well-being of their citizens.

The bankrupt Iceland, after negotiating a loan with Russia, applied to the International Monetary Fund (IMF) in November 2008. The IMF rescue plan, which includes a loan of €4,600 million, envisages a plan of fiscal austerity and drastic reduction of public debt, which is the second-highest out of all the developed countries, after Japan, and which represents almost double the country's GNP. Hannibalsson criticised the plan as being diametrically opposed to what other countries were doing, with their stimulus packages and public spending to reduce the paralysis in the private sector. He called the plan "the wrong medicine at the wrong time and in quite the wrong place". The Icelandic politician believes that the time has come for the people responsible to be judged, and to assume their responsibilities. Hannibalsson blamed turn-of-the-century “neoliberal fundamentalism”, which led to deregulation and uncontrolled privatisation. As a consequence Icelandic society feels swindled, and public opinion partly shows a certain humiliation at the aid that this tiny island is requesting from the rest of Europe.

>> More information:

“Iceland’s Ruling Parties Reach Agreement on EU” (Iceland Review Online, 5 de mayo 2009)
“Has Iceland really adopted two-thirds of EU legislation?” (EUobserver, 29 de julio, 2009)
“Iceland's application acknowledged” (Consillium homepage, 27 de julio, 2009)
“Iceland Gets Help to Recover From Historic Crisis” (IMF, 2 de diciembre, 2008)