Thanks, EU, but Iceland isn’t so keen on joining any more

June 14, 2013
Obsession
Euro Crunch
June 14, 2013

Iceland is rethinking its desire to become a member of the European Union, putting talks with the European bloc on hold for the time being. Although it had completed about a third of the accession negotiations, polls indicate the Icelandic people don’t want their country to become part of the EU.

In a press conference with Stefan Fule, the Czech official responsible for EU membership, Icelandic Minister for foreign affairs Gunnar Bragi Sveinsson said the decision is all about the people: “This is how democracy works,” he said.

The irony probably isn’t lost on southern Europe, where citizens have pushed back at politicians who pressed ahead with economic austerity handed down by the troika—European leaders, the European Central Bank, and the IMF—to the detriment of their own economies. The IMF admitted last week that some of its decisions were made to help the euro at the expense of Greece, which is in its sixth year of recession.

Iceland is also a painful symbol that Europe’s economic mess may have been handled all wrong. Burdened with an insolvent banking sector and forced to take an IMF bailout, Iceland’s economic situation was, at one time, worse than Greece’s. Its economy contracted sharply in 2009 and 2010, but has since notched decent growth.

“Three or four years ago, our policy measures were probably opposed by most established governmental or financial authorities in Europe. But the end result is that Iceland is now on the road to a much stronger recovery than any other European country that has faced a financial crisis in recent years,” Olafur Grimsson, Iceland’s president, said earlier this year. In particular, Iceland let its banks fail, imposed capital controls, and eschewed austerity measures.

On the continent, the difference between being a member of the 17-state euro currency bloc and the 27-state European Union is becoming more stark. Membership in the European Union imposes regulation, budgetary costs, and financial oversight–enough that it’s making the UK consider leaving. By halting progress to become the next EU member state, Iceland is hesitating about even the first step.

Correction: An earlier version of this story incorrectly stated that Ireland let its banks fail, imposed capital controls, and eschewed austerity measures. It should have said Iceland.

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