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MEMO/10/48

Brussels, 24 February 2010

Key findings of the Commission's Opinion on Iceland

Background and method

Iceland applied for membership of the European Union on 17 July 2009. The European Parliament and national Parliaments were notified of this application. Subsequently, on 27 July, the Council of the European Union requested that the Commission submit its opinion on the application in line with the procedure laid down in Article 49 1 of the Treaty on European Union.

In the Opinion, the Commission analyses Iceland’s application on the basis of the country’s capacity to meet the criteria set by the Copenhagen European Council of 1993:

- Stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

- The existence of a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union;

- The ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union.

The Commission has analysed both the present situation and Iceland's medium-term (three years) prospects. The opinion identifies key policy areas which will require particular attention in the event of Icelandic accession.

Following today's recommendation by the Commission, the next step is for the Council of the European Union to decide whether to open accession negotiations with Iceland.

Political Criteria

Iceland is a parliamentary republic with deeply rooted traditions of representative democracy and separation of powers. Its constitution was adopted in 1944, when the Republic was established.

The government is subject to effective parliamentary control; its ministers are accountable for their acts. Municipal authorities function efficiently.

Iceland’s judiciary is of a high standard and the judicial system is well established. The rule of law and respect for human rights are guaranteed. Some concerns have nevertheless been raised as regards the effective independence of the judiciary, linked to the procedure for judicial appointments.

Iceland’s public administration is, in general, efficient and free from political interference. A public administration reform process was initiated in October 2009.

Following the financial crisis, certain questions have however been raised concerning possible conflicts of interest in Iceland’s public life. Against this background, mechanisms to reduce the scope for conflict of interests will need to be strengthened appropriately.

Economic Criteria

Iceland is a small, open economy with a population of over 300 000 and a nominal GDP of € 10.2 billion in 2008. This equals about 0.06 % of the EU-27 population and about 0.08 % of EU-27 GDP. During the 1990s and for most of the past decade, Iceland restructured its economy through deregulation and liberalisation policies. It moved from an economy mainly based on the fishing industry to a more diversified one with a comparatively large and open financial sector. The country's economic future became increasingly intertwined with the banking sector’s health and its growth increasingly dependent on institutional and individual investors’ risk appetites.

The collapse of Iceland’s vulnerable banking sector, in October 2008, pushed the economy into a deep recession. With the assistance of the international community, in particular the International Monetary Fund (IMF), Iceland's economy is starting to produce first signs of stabilisation. The government has taken the necessary measures to reduce a large fiscal deficit. However, fiscal consolidation and the firm implementation of a credible fiscal strategy remain key challenges.

Iceland can be considered a functioning market economy despite its current difficult economic situation. Before the crisis, the country proved able to withstand competitive pressures and market forces within the European Economic Area (EEA). Bearing this in mind, Iceland should be able to cope with competitive pressures and market forces within the Union in the medium term provided it swiftly implements the necessary policy measures and structural reforms.

European Standards

As a member of the EEA, Iceland has already aligned a large part of its legislation and policies with European standards. It is well prepared to take on the obligations of membership in the medium term, particularly in the fields covered by the EEA Agreement 2 . Efforts to further align legislation with EU law and to ensure its implementation and enforcement need to continue. Serious efforts will be required particularly in the area of fisheries, environment, agriculture and rural development, as well as free movement of capital and financial services.

1 :

Article 49 TEU states: ‘ Any European State which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union […].' Article 2 states that ‘ the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities.'

2 :

The EEA Agreement guarantees the free movement of goods, persons, services and capital, as well as equal conditions of competition and non-discrimination against individuals in EEA States.


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