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Brussels, 12 October 2011

Key findings of the 2011 progress report on Iceland

The Progress Report on Iceland is part of the 2011 Enlargement package adopted by the European Commission on 12 October. The Commission concluded that Iceland continues to meet the political criteria for EU membership, can be considered a functioning market economy and, overall, is well advanced in its preparations for membership, with a number of challenges remaining in several areas on the road to accession.

Political criteria

Iceland meets the political criteria for EU membership. Iceland is a functioning democracy with strong institutions and deeply rooted traditions of representative democracy. The country's judicial system continues to be of a high standard, and Iceland ensures the continuous strengthening of its already high level of protection on fundamental rights.

Iceland has further strengthened its anti-corruption framework with the ratification of the UN convention against corruption and the definition of specialised codes of conducts for ministers and for a number of categories of employees to limit conflict of interests. Several judges were appointed in accordance with the rules of the amended Judiciary Act.

The recommendations of the independent Special Investigation Committee, set up in the context of the financial crisis, are being implemented and work is ongoing to review the Constitution. The Court of Impeachment convened in March 2011 and the former Prime Minister was indicted for gross negligence.

Economic criteria

Iceland can be considered a functioning market economy. It should be able to cope with competitive pressures and market forces within the Union over the medium term, provided that it continues addressing current weaknesses through appropriate macroeconomic policies and structural reforms.

The economic stabilisation programme, supported by the IMF, enabled Icelandic economy to start recovering following the 2008 crisis. Since then, it has made considerable progress to stabilise the economy and to lay foundations for a return to positive economic growth. However, vulnerabilities in the private sector continue to impede a stronger recovery of domestic demand, and banks are still suffering from weak asset quality. The refinancing of the banking sector has been largely completed even though further operational and financial restructuring is required to allow for the resumption of bank lending and consolidation in the sector. The levels of unemployment and indebtedness of private households and businesses remain high. Inflation is on the rise. Currency restrictions are still in place, although first steps have been taken to prepare for a phased lifting of such controls.

EU legislation

The overall level of Iceland's preparedness to meet EU legislative requirements continues to be good due to the country's participation in the European Economic Area and in the Schengen agreement. A good level of alignment can be noted in most chapters covered by these two agreements.

Difficult negotiations can be expected in a number of key areas such as free movement of capital, fisheries, agriculture and rural development, environment including whaling, taxation and customs unions, regional policy and food safety. The Icesave dispute remains unsolved.


1970: Iceland joins European Free Trade Association (EFTA)

1973: Free trade agreement with the European Community

1994: Iceland joins the European Economic Area (EEA)

2000: Iceland becomes a participant in the Schengen agreement

July 2009: Application for EU membership

February 2010: Commission's Opinion on Iceland's application for EU membership

June 2010: European Council decides to open negotiations with Iceland

July 2010: Formal opening of the accession negotiations

15 November 2010: Start of screening meetings

20 June 2011: End of screening meetings

27 June 2011: Accession conference: 4 negotiation chapters were opened out of which, two were provisionally closed.

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