Brussels – With a very tight margin between the ‘yes’ and ‘no’ camps and a polarised environment, Iceland is heading towards one of the most crucial and defining votes in its recent history. Although – and it is quite strange to say this – the 29 August referendum on restarting EU accession talks will not necessarily be a turning point for its potential future in the European Union.
“The thing with this referendum is whether we exclude the option of concluding EU accession negotiations or not without even knowing what it would entail, because we do not really know until we actually conclude the negotiations,” explains Auðunn Arnórsson, journalist and lecturer at the University of Iceland, in an interview with The New Union Post just a couple of weeks before the vote.
While there is “no risk” at this stage in allowing this option to be tried out – as Icelandic people would decide whether to join the EU in a second referendum, based on the outcome of the negotiations – excluding this path from the outset would mean that “we will never know on which terms Iceland could have been offered the opportunity to join,” he adds.
It would be “just common sense” not to exclude a potentially beneficial scenario while maintaining the prerogative to say “no” at the end of the process. However, as Arnórsson highlights, this is the “most emotional vote,” and the “yes” lead in the most recent opinion polls – 53–54% – is “so narrow that there is no certainty about what will happen.” Speaking with The New Union Post, Kristinn Hróbjartsson, director of the independent Icelandic think tank Varða, echoes his words: “With a margin this tight, turnout may end up mattering more than persuasion.”
Three dividing issues
Drawing from his paper on the road to Iceland’s EU referendum, published by the KAS Regional Programme Nordic Countries, Arnórsson recalls that a referendum is “a polarising method of taking a decision” and that, for this reason too, it can become highly emotional for some people, particularly those opposed to joining the EU. Hróbjartsson highlights that both camps are focused on the same issues, but disagree on what the vote is actually about: the “yes” camp about a process, the “no” camp about the destination.
Yet both experts agree that three topics are driving the referendum campaign: the economy, sovereignty and fisheries.
On the economy, the issue concerns the Icelandic króna. As most public debt is indexed to inflation, wealthier segments of the population have an interest in keeping a small currency that fluctuates significantly, as they can lend money with little risk and get back the value of their loan plus interest. By contrast, “this is not in the interest of wage earners or the normal consumer in Iceland,” Arnórsson notes, referring to the benefits of adopting the euro, including its stability and lower interest rates. “Normal voters would welcome the option of being able to use the euro, but that only comes by joining the EU.”
When it comes to sovereignty, those who are against joining the EU believe that Iceland would be surrendering its independence, whereas those who want to continue the negotiations believe that the most important thing is to sit at the table where decisions are made, gaining de facto sovereignty by joining the EU. Through the EEA/EFTA framework, “we have accepted for more than 30 years to be subscribers to European legislation that is put together where we have almost no role at all in what automatically becomes part of Icelandic legislation,” Arnórsson points out.
However, the main reason why the majority of Icelanders are sceptical about joining the EU is related to the fear of losing control over the country’s fisheries resources. The EU Common Fisheries Policy has “a very bad reputation” not only in Iceland, but also in Norway, the Faroe Islands and Greenland, and this is “why the whole north-western flank of Europe is not part of the EU,” Arnórsson continues.
However, this could represent the very reason why the negotiations should be allowed to proceed. As the Icelandic journalist and analyst explains, a likely scenario is that “Iceland would be able to join the EU without having to change almost anything,” mainly on the basis that fish stocks in Icelandic waters are “completely” separate from those in EU waters, while the commercial stocks are local and “for the past 50 years, have only been fished by Icelandic companies.”
Three aspects of a potential reopening of talks between Brussels and Reykjavík should be considered, as they would change the current situation regarding fisheries in Iceland.
First, the formal decision on the total allowable catch would be taken each year at a meeting of the EU fisheries ministers in Brussels. Second, reciprocity would be granted for foreign investment in Icelandic fisheries companies, as it is currently forbidden by law for non-Icelanders to own more than 49% of companies that hold quotas in this national resource. Third, the mandate to negotiate with third countries – including Norway – on fisheries involving shared and migratory stocks would pass to the European Commission.
In any case, Arnórsson strongly believes that what would most likely come to light during the negotiations is that “many people would realise that what they had believed for so long is not really such a serious issue.” At the same time, Hróbjartsson notes that Iceland would be negotiating “from a much stronger position than in 2009,” considering that the two countries “whose interests clash most directly with ours” in Icelandic waters – namely, Norway and the UK – are both outside the EU now.
Finally, there is another topic that almost no one is campaigning on: security. “Iceland sits in the operating zone of the US, Russia, the EU and China all at once,” the director of Varða points out. However, “the geopolitical turmoil” – including US President Donald Trump‘s ambiguity regarding NATO’s defence commitments and his repeated threats to annex neighbouring Greenland – “is almost entirely absent from the debate” about the 29 August referendum.
What is next?
On 29 August, all this will become clear. The issue for the government in Reykjavík will then be what to do with the result of the referendum. While it is unknown whether the towel will be thrown in if the result is “no”, it is quite clear that, if the “yes” vote were to prevail, the EU accession process would restart from where it was frozen after the 2013 general elections.
Back then, the government formed by the Progressive Party and the Independence Party did not hold a referendum before freezing Iceland’s EU accession process, based on the promise they had made during the election campaign. However, as Arnórsson recalls, they did not want a referendum because “they feared that it could create a situation where the people would mandate a government that did not want to join the EU to negotiate its membership.”
More than a decade later, a referendum could precisely mandate the government comprising the Social Democratic Alliance, the Liberal Reform Party and the People’s Party to return to Brussels and try to bring the negotiations to an end.
The Council and the Commission are ready to initiate the resumption of accession negotiations, starting with the 11 chapters provisionally closed, to see whether anything needs to be renegotiated. These are mostly the chapters covered by the EEA/EFTA Agreement, through which Iceland is continuously incorporating European legislation, “and this is why it should be dealt with quite quickly,” Arnórsson explains.
The process would have to focus in particular on the other 17 chapters already opened (but never closed), but especially on the five yet to be opened – including fisheries, agriculture, food safety and the free movement of capital – which are the most difficult to negotiate. The expectation is for these five chapters “to be opened as soon as possible,” precisely to speed up the process and provide answers to the question Icelanders have been debating for decades: “On which terms could we be offered the opportunity to join the European Union?”
The government’s aim is to conclude the negotiations and draft the Accession Treaty “before all this becomes an election campaign issue again at the next general election in late 2028.”
Hróbjartsson, director of Varða, analyses what could happen after a comprehensive agreement is reached as a result of the negotiations. “If people vote it down, that is the end of it. If they approve it, a constitutional amendment is needed” to allow the transfer of powers to international institutions, “which Iceland’s constitution currently does not permit.” Afterwards, the Alþingi (the national parliament) dissolves and, following the general election, the new Parliament has to pass the same amendment again.
This is where four sceptical parties – including the governing People’s Party – could really matter. “A general election can produce a different Parliament and a different government that will be under no obligation to finish what its predecessor started,” Hróbjartsson warns. However, Arnórsson sees reasons for optimism. “More people may turn from being sceptical to being in favour of joining the EU,” particularly those “tired of the Icelandic króna, the high interest rates, inflation and prices, and all the instability that comes with this tiny currency.”
The state of EU–Iceland relations
Iceland submitted its application for EU membership in 2009. Candidate status was granted in June 2010, with accession negotiations beginning the following month. However, following the 2013 general elections, Reykjavík froze the negotiations and, two years later, sent a letter requesting that the EU no longer consider Iceland an applicant country.
Despite this, it remains closely linked to the EU through its membership in the European Economic Area (EEA) Agreement, which unites all 27 EU Member States with the European Free Trade Association (EFTA) countries – Iceland, Liechtenstein, and Norway – in the Single Market.
Reykjavík is also a member of the Schengen Agreement, giving its citizens the right to travel without a passport within the area, and is a signatory to the Dublin Regulation on asylum policy. As a member of the Arctic Council, Reykjavík supports the EU’s bid for formal observer status.
Additionally, Iceland participates in a wide range of EU policies, agencies, and programmes, covering areas such as enterprise, environment, education and research, competition policy, state aid, social policy, consumer protection, tourism, and culture.
Trade relations between Reykjavík and Brussels are primarily governed by the 1972 free trade agreement and the EEA Agreement, which extends the Single Market to EFTA countries. As the EU’s Common Agricultural Policy and Common Fisheries Policy are not included under the EEA Agreement, Article 19 provides the legal basis for establishing rules to progressively liberalise agricultural trade on a mutually beneficial basis.
