Bloomberg News

Iceland Affirms EU Snub as Debt Crisis Drags On, Sveinsson Says

June 14, 2013

Iceland’s new government stood by a decision to halt efforts to join the European Union, saying it is determined to maintain control over its natural resources and escape the fallout of the euro debt crisis.

On his first trip abroad after taking office last month, Foreign Minister Gunnar Bragi Sveinsson resisted an EU plea for a rapid public referendum on whether to restart the entry bid or call it off for good.

“We are going to do it our way, this is our decision,” Sveinsson, 45, said in an interview in Brussels today. “This government is not going to keep on pushing forward this application. At some time, there will be a referendum, but I cannot tell you when and by whom.”

EU leaders had celebrated the prospect of welcoming Iceland -- a developed nation where the economy grew 1.6 percent in 2012 -- as a sign the bloc’s appeal isn’t limited to poorer nations in the south. Iceland’s snub changes that.

“It was not easy for me as a person” to learn of the new mood in Reykjavik, EU Enlargement Commissioner Stefan Fule said after meeting Sveinsson last night. He urged the government in Reykjavik not to take “unlimited time” on its EU options.

Asked about Fule’s deadline, Sveinsson, a long-time opponent of the EU bid, said: “I don’t know what time he is talking about.” He said a referendum to steer Iceland back toward the EU would only come once a full study of the state of the EU enables Icelandic leaders to “try to see into the future.”

Economy Doubts

While Iceland remains tied to the EU’s single market, it isn’t the first Nordic country to turn its back on membership. Citizens in Norway voted twice against becoming a member, in 1972 and 1994. Iceland’s falling-out with the bloc reflects a changing cost-benefit analysis.

Iceland sought EU membership in 2009 after the collapse of its biggest banks left it reliant on international loans, puncturing the notion the island could survive on its own. The economy has since rallied, growing while the euro zone sank into recession.

Even after the economic shocks of 2008 and 2009, Iceland is richer than the average EU country. Its gross domestic product per person was 111 percent of the EU average in 2011, regional data show. Croatia, the ex-Yugoslav republic set to join the EU next month, was at 61 percent.

Unpopular with Iceland’s 320,000 people from the start, the membership bid ran until January 2013 when in the heat of the election campaign it was downgraded by the pro-EU government that launched it. Contacts about entry terms continued until the new coalition put a stop to them.

With the economy of the 17 euro nations, the core of the 27-nation EU, in nonstop contraction since the fourth quarter of 2011, Sveinsson said the critics have been proven right.

“We have seen these economic struggles in Europe, what will be the health of the euro in forthcoming years?” he said. “What is the plan for the European Union in forthcoming years?”

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

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


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