2008-11-14 22 h 11 :: ft.com :: Bank crisis prompts Iceland EU rethink

http://www.ft.com/cms/s/0/5a29ac18-b28f-11dd-bbc9-0000779fd18c.html

Bank crisis prompts Iceland EU rethink

By David Ibison in Stockholm

Published: November 14 2008 22:11 | Last updated: November 14 2008 22:11

Iceland’s government has reversed its long-standing opposition to European Union membership in the wake of the collapse of its banking system and could join as early as 2011.

Geir Haarde, prime minister, said on Friday that he would set up a special panel to discuss joining. “We have always said that we will assess at any given time how we co-operate with Europe,” he said. “This process will help us make our future decisions.”
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The move reflects growing public pressure to reconsider joining the 27-member block, with popular support for the move rising from around 50 per cent before the crisis to around 70 per cent.

Mr Haarde’s right-leaning Independence party has opposed EU membership, but governs in a coalition alongside the left-leaning Social Democratic Alliance, which favours membership.

The collapse of Iceland’s banking system has triggered a severe weakening of its currency and will lead to a harsh recession.

The crisis might have been avoided, politicians argue, if Iceland had been an EU member. It would have protected its currency and provided deeper backing for its banking system.

Even if Iceland decides to join, EU membership is not assured.

One of the main sticking points is expected to be granting access to Iceland’s rich fishing grounds to other EU members.

This is the first time Iceland has formally proposed EU membership. Officials at the ministry of foreign affairs are understood already to have drawn up a preliminary plan that envisages an application early next year and eventual entry in 2011.