Iceland announced last week that it had decided to drop its application to join the European Union. This move follows the pledge to withdraw the EU application given by the country’s Eurosceptic government that was elected two years ago. Foreign Minister Gunnar Bragi Sveinsson told the media that its government submitted a letter to the European Commission and Latvia, which is currently holding the EU’s rotating presidency, that Reykjavik was withdrawing its application. “Iceland’s interests are better served outside the European Union,” the minister said.
Iceland submitted its bid to join the block in 2009 when the country’s economy was hit hard by the economic crisis that caused the collapse of the Icelandic krona. Having lost almost half of its value, the Eurozone membership seemed to be an attractive option. Yet, Iceland never felt completely comfortable with the Union’s fishing policy and especially quotas, which were seen as a major obstacle to joining the EU. Fishing is a vital part of Iceland’s economy and although it was never brought up during the accession talks between Brussels and Reykjavik, it was always considered a rather thorny issue.
Last year, thousands of demonstrators protested against Iceland’s membership in the EU. In fact, the EU membership has never been a priority for the majority of Icelanders, which was confirmed by the latest opinion polls. The talks with the EU were suspended already in 2013 when the centrist Progress Party and the right-wing Independence Party came to power. The incumbent government, however, stressed that it wanted to maintain “close ties and cooperation” with the block. Being a member of the Schengen area and the European Economic Area (EEA), Iceland is already benefitting from the ties with the EU. For instance, the membership in the EEA allows the country to export to the mainland Europe without tariffs.
Iceland’s economy has slowly recovered from the recession of 2008 as official numbers suggest that GDP reached record levels when it grew by 1.9 percent in 2014. Despite these positive developments, economists are not very positive about the country’s labour market. Asgeir Jonsson of the University of Iceland commented that “GDP per capita remains lower than in 2008, and while there is no shortage of jobs, we lack jobs that pay well, especially for young graduates”.