Iceland's EU questions unanswered ahead of Saturday vote

25th April 2009, Comments 0 comments

With the leading left-wing party saying it will push for EU membership if elected, voters seem less sure about their feelings.

Reykjavik -- With Iceland's economy in tatters, the traditionally eurosceptic country is split over whether to forge closer ties with the European Union and adopt the euro.

The Social Democrats, who head the interim government and currently lead the opinion polls, say they will push to join the 27-member bloc if elected, but voters seem less than enthusiastic.

An April 22 poll by the Morgunsbladid newspaper showed 31.7 percent back the Social Democrats -- the only openly pro-EU party running in Saturday's elections.

"It seems that a large proportion of Icelanders want the single currency without membership of the EU," explained Gunnar Helgi Kristinsson, a political scientist at the University of Iceland.

"The people have understood that in the long-term, the euro would be a guarantee of financial stability for this badly-managed economy, but at the same time many people fear losing control of their resources, starting with their fisheries," said Gunnar Haraldsson, the director of Iceland's Institute of Economic Studies in reference to the European Union's fishing quota policy.

The economist said Iceland's euroscepticism has its origins in the country's nationalist sentiment that grew since its independence from Denmark in 1944.

"My feeling is today the krona is too weak and how could we rebuild our economy if we don't have any balanced currency?" said Urnur Kristjansdottir, a 35-year-old customs official.

But Kristjansdottir warned many Icelanders fear losing their identity if the Social Democrats carry out their pledge to take them into the EU.

"We have no hesitation, we want membership as soon as possible," the party's deputy leader Arni Pall Arnason told AFP.

On Monday, Social Democrat leader and the country's interim prime minister, Johanna Sigurdardottir, stressed EU membership would be a priority if her party is victorious in Saturday's elections.

Sigurdardottir wants the single currency within four years, although first she must convince her junior coalition partners, the Left Green party, that closer ties with Brussels would be a good move for Iceland.

"We have been opposed to the EU membership mainly because of the fish sector," said Left Green spokeswoman Katrin Jakobsdottir. The country's fishing industry makes up 36.6 percent of the country's total exports.

"The door is opened but we should await the results of elections next Saturday and see what we can do. We don't have to be in a hurry," she added.

For their part, the right-wing Independence Party, whose coalition with the Social Democrats collapsed in January after a wave of protests against their economic polices, remains eurosceptic.

"The single largest obstacle (to EU membership) is the fish," said Independence Party leader Bjarni Benediktsson.

Benediktsson argues Iceland can remain outside the EU as it is already part of the European Economic Area and enjoys good trade links with Europe, the United States and China.

He added: "I've always said if we would change our currency the euro would be the strongest alternative.

But Franek Rozwadowski, the IMF's representative in Iceland, said that idea had not been discussed amongst officials.

"The IMF has not yet had with the Icelandic authorities any discussion about the future of the krona. What we are focused on now is stabilisation, stabilisation of the inflation, restructuring the banking sector, fiscal sustainability," Rozwadowski said.

Amelia Torres, a European Commission spokeswoman, said the EU "would not support" non-members adopting the currency in a bid to stabilise their economies.

"That won't solve the problems in countries which should be solved in a structural way" by adopting different budgetary or economic polices, Torres said.

Facts about Iceland, struck down by the economic crisis:

Iceland goes to the polls in a snap general election on Saturday, six months after its economy collapsed and massive public protests forced the government to resign in January.

The Republic of Iceland comprises one large island -- the 17th largest in the world -- and several smaller ones situated near the Arctic Circle in the North Atlantic.

GEOGRAPHY: Iceland has a surface area of 103,000 square kilometres (40,000 square miles), 11.5 percent of it under glaciers, located 300 kilometres (180 miles) southeast of Greenland and 900 kilometres (550 miles) north of Scotland. Only one percent of the land is cultivatable. The Gulf Stream keeps Iceland warmer than might be expected.

POPULATION: 319,000 (2008)

CAPITAL: Reykjavik

LANGUAGE: Icelandic

RELIGION: Lutheran Church of Iceland 82.1 percent, Roman Catholic Church 2.4 percent, others 15.7 percent (2006)

HISTORY: Discovered in the eighth century by Irish monks, Iceland was first colonised by Norway then, from 1380, by Denmark. It became autonomous in 1905, was linked to the Danish crown from 1918, and became fully independent as a republic in June 1944 following a referendum.

INSTITUTIONS: Iceland is a parliamentary democracy, with a 63-seat legislature, the Althing, elected by universal suffrage every four years.

The president, elected by universal suffrage every four years, has an essentially ceremonial function. Olafur Ragnar Grimsson was first elected in August 1996 following four successive terms by Vigdis Finnbogadottir.

Prime Minister Johanna Sigurdardottir, of the Social Democrats, has been in office since February, heading an interim coalition with the Left Green Movement.

ECONOMY: Iceland was one of Europe's most prosperous countries until its three biggest banks and oversized financial sector collapsed in October under the weight of the global credit crunch. The country was pushed to the verge of bankruptcy, as its currency plummeted by 44 percent and thousands of people lost their jobs.

It received a 2.1 billion dollar bailout from the International Monetary Fund in November, and some early signs of recovery have been observed.

Iceland has its fishing and aluminium sectors to fall back on. Fishing, its traditional economic base, accounted for 36.6 percent of overall exports last year, second only to products manufactured by the aluminium industry, which represented 52.1 percent of exports, according to Statistics Iceland.

Tourism is continuing to grow, and the island's rich potential in hydroelectric and geothermal power is being tapped.

Unemployment was virtually inexistent before the crisis, rising from 2.3 to 7.1 percent in the first quarter. It is expected to hit 10 percent by the end of the year.

Inflation peaked at 18.6 percent in January before sliding back to 17.6 percent in February. Growth was 0.3 percent in 2008, but is expected to contract by 10 percent in 2009.

GDP: 52,000 dollars per capita (2008), down by 20 percent from 2007.

DEFENCE: Apart from its coastguard Iceland has no defence forces of its own but is a member of NATO. The United States withdrew in 2006 from the Keflavik air base that provided defence to the island.

ORGANISATIONS: Iceland is a member of the Nordic Council and of the European Free Trade Association.

Delphine Touitou/AFP/Expatica

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