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Iceland Iffy on EU Club


The EU’s ongoing crisis is chipping away at the continent’s unity and extracting a terrible toll on a generation of workers in the Eurozone’s periphery. But less frequently noticed is how membership in the EU has lost its cachet. Although Balkan countries are still chomping at the bit to be let in (note the recent concessions Serbia has made on the Kosovo issue), other prospective members are having serious second thoughts about joining the club.

The Wall Street Journal has an excellent short piece on Iceland’s upcoming election, and the great likelihood that whichever party wins, EU membership will be put on ice for the time being. The proximate cause? How Cyprus was handled:

“The reasons for joining the euro didn’t work out in Cyprus,” Sigmundur David Gunnlaugsson, the head of the Progressive Party, said in an interview. “What the economic crisis in Iceland and Europe has taught us is the importance of being able to control your own destiny.”

As the financial crisis unraveled, Iceland notably let its big banks fail, shunting off a sizable chunk of the losses onto foreign investors. Seeing Cyprus, and even more Greece, have its recovery policies dictated by a cadre of hectoring Eurocrats from Brussels (who paradoxically have quite a bit to lose should Greece in particular start defaulting) must not sit well in Reykjavik. Not being in the EU in 2008 felt like having dodged a bullet. Why step into a new fusillade now, voters must be thinking.

But it’s not just how Europe has behaved towards its periphery that has Icelanders rethinking their futures. Europe’s brand is tarnished, and a small country like Iceland seems to think it could do better engaging with the world on its own terms.

“It seems Europe has entered a period of historic decline,” [Sigmundur David Gunnlaugsson] said, adding that Iceland must build ties with growing countries in Asia and elsewhere.

Iceland recently became the first European country to sign a free-trade agreement with China, for instance. And licenses are being issued to foreign oil and gas companies in Europe and Asia interested in developing Iceland’s untapped fields of natural resources.

That’s about it in a nutshell: Europe is losing its pull in its near-abroad while a rising power half-way around the world swoops in. How far the EU’s star has fallen: Once upon a time it had aspirations to be a global counterweight to the United States.

[Downtown Reykjavik image courtesy of Shutterstock]

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  • jtintokyo

    This is yet another example of the failure of the euro. Iceland has survived and is recovering because they let those most responsible (namely foreign lenders) take full responsibility for their foolishness. Had Iceland been in the euro, Iceland would now, like Cyprus, be under the yoke outsiders. As it is, this tiny country remains in control of its destiny.

    The lesson is clear – fiscal union without political union is nonsense. The very first thing that the nascient US Federal Government did at the end of the Revolutionary War was to assume the debts of the various states. Thus, the union that is the United States was born. Europe is centuries away from this. The euro as a whole is a failure and it will eventually shrink to Germany, Austria, Holland, Finland and a handful of other like minded nations.

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