Iceland Rescinds Its Bid for EU Membership

March 16, 2015

By: Kelly Diamond, Publisher

iceland withdraw euIceland recently made public its intention to withdraw its bid for European Union membership. It placed its bid for membership back in 2009, when the financial crisis was at a head. The fall of Lehman Brothers in the United States toppled three of Iceland’s largest banks, so at that time, the EU looked to be a stable option compared to what was happening.

Six years of evaluations, talks, and negotiations later, Iceland has noticeably cleaned up its act and is seeing record high GDPs. No doubt there is still a tough road ahead, but the country is committed to a principled recovery. They do not want to regress back into the same horrible compromising practices that lead them to crumble six years ago, and so are rightly taking a politically cautious approach.

Prior to the political detox, had the EU accepted and terms were met, the EU might likely have Iceland among its members. But a lot has happened since then. Iceland is reborn with new confidence and strong resolve and what was once a shiny glimmer of hope and stability is now losing its allure.

Though Iceland was rather coy in its reasoning for this decision, it maintains that its interests are better served outside the EU, while maintaining a cooperative and friendly relationship with it. Iceland currently enjoys many benefits of the EU without the encumbrances of actual membership.

The north Atlantic island is a member of Europe’s visa-free Schengen area and the European Economic Area. That allows it to export seafood to the mainland tariff-free and helps boost tourism, which is crucial to the country’s foreign exchange earnings.” (Source: The Guardian)

There is some grumbling, albeit not formally discussed in talks between Iceland and the EU, regarding the fishing quotas sought by Brussels. The Fishing Industry certainly does comprise a large part of the Icelandic economy, and certainly not one they will allow Brussels to hold hostage.

While Icelandic diplomats might not want to speak out of turn, I certainly stand nothing to lose from pointing out the obvious. The EU is still trying to overcome its sovereign debt issues amongst the smaller nations that exhibited irresponsible fiscal policies. Its fate rests squarely and quite precariously on the shoulders of one country: Germany.

While the EU might have a sound monetary policy, its fiscal policies are scattered. Germany’s fiscal discipline was borne out of a hyper-inflation era that won’t soon be forgotten, so it is highly adverse to the idea of monetizing the debt. It’s true that the EU is dancing on the line of doing just that with all its asset backed securities and of course bailing out member countries, and that’s already a large compromise on the part of Germany.

If Iceland were looking at an EU that was as healthy as Germany then it might reconsider. But such is not the case. It’s watching Switzerland abandon its three year policy to cap the Swiss Franc against the Euro. It’s watching the smaller members like Cyprus have private pensioner money forcibly taken to bail out Cypriot banks.

There is also a very scary prospect, assuming at least one member of the Icelandic government is paying attention: either the EU will break up due to irreconcilable fiscal differences, or the EU will federalize and become the “United States of Europe”, so to speak with one central government commanding and centrally planning the EU’s fiscal policies. The former likely entails the dissolution of the Euro. The latter entails the dissolution of national sovereignty for all member countries.

If the United States is a lesson for anything, it is a warning to the entire world against such large centralized unions. Certainly there are better ways to overcome trade barriers than centralization! When tariffs are reduced trade is freer. Currency exchanges need not be so expensive if each country maintains sound monetary policies.

I have to believe Iceland sees all this, though. If I see it as just some private citizen in the United States with no skin in the game, then someone over in Iceland has even more insights into the implications of joining the EU.

No question the popular desperation to join the EU back in 2009 was there. The support for such an endeavor now, however, has waned considerably. So, Iceland is backing off, saying only with a referendum will it reconsider this decision.

A union is a union. They might vary from one to the next, but the general purpose of them is for members to relinquish considerable sovereignty and control over some things, to enjoy the potential benefits begotten from the power in numbers.

But like any high school group project, the members who excel are bogged down by the ones who are struggling or have no ethic at all; and conversely, those who are struggling are lifted up on the backs of those who excel. I understand Germany’s reluctance to shoulder Greece given their fiscal ethics are so diametrically opposed.

Labor unions here in the U.S. are wrought with corruption, and while their leaders are living in opulence off the dues and backs of the working class, the laborers are losing their jobs with every new collective bargaining agreement made. Sure the remaining employed members are happy with what they get, but they got it at the expense of the job of someone else.

I look at the United States and see it took under 150 years for states’ rights to be trampled. Leaving the union, even as a state, literally takes an act of Congress. Leaving the United States as an individual is difficult enough! Scotland couldn’t even manage to emancipate itself from Great Britain.

I applaud Iceland for this bold move. With a population somewhere between that of Riverside, California and Honolulu, Hawaii, it is right to believe that with healthy trade agreements it is better off on its own. There isn’t enough soaring rhetoric to mask the tragic reality of the EU. Independence is hard work but well worth the effort and struggle.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top



Privacy Policy: We hate SPAM and promise to keep your email address safe.


Enter your name and email to get immediate access to my 7-part video series where I explain all the benefits of having your own Global IRA… and this information is ABSOLUTELY FREE!