Reykjavík Grapevine - 18.06.2010, Blaðsíða 18

The Reykjavík Grapevine
Issue 08 — 2010
18
EGILL HELGASON
jULIA STAPLES
ILLUSTRATIONS BY LóA HjáLMTýSdóTTIR
HELLO, IS
ANYBOdY
OUT THERE?
A small nation looking
for friends in a big world
FOCUS ON THE EU
The main obstacles in the
negotiations with the EU
are fisheries and farming,
as well as currency
matters. Through the EEA
Treaty, Iceland is very
integrated into Europe so
other matters are quite
easy to resolve; much of
the legislation has already
been adopted.
Sophia
And The Eu
Germany-to-Iceland trans-
plant Sophia van Treeck
investigates whether Ice-
land should join the EU,
with the help of some
knowledgeable folks
Last winter we had a German intern
here at the Grapevine. She is called So-
phia van Treeck, she is awesome, and
she turned in some great work over her
three-month stint. Now, we like to talk
about all sorts of stuff that interests
us here at the office, and one of those
things happens to be the European
Union and Iceland's pending application
to join in on all the purported EuroFun.
As a born and bred citizen of the EU, So-
phia had some trouble understanding
why Iceland joining the EU should even
be a topic of discussion.
“I don’t know, it seems odd to me that people
would even have this argument,” she would
often exclaim as we debated the matter. “I
have a real hard time spotting any draw-
backs to an EU membership. I don’t think of
Germany as any less German even though it
belongs to the EU, and I certainly haven’t no-
ticed any real problems stemming from our
membership. Also, you guys adopt EU legis-
lation all the time. Wouldn’t it be better for
you to have a say in it?”
Now, we are curious, inquisitive folks at
the Grapevine, and we thought it would be
best if Sophia went into a full-on investiga-
tion of the matter, with the help of some lo-
cal smart folks that have been outspoken on
the subject. Then you readers might perhaps
learn something along with Sophia.
With the help of her interlocutors, Sophia
Later this june—this autumn at the lat-
est—Iceland is set to become a full can-
didate for membership of the European
Union. An application to join was sent to
Brussels in july last year, and now formal
negotiations on Iceland's membership
are due to begin. However a majority of
the nation is opposed to joining the EU;
a membership treaty would probably be
voted down in a referendum.
For the last two decades, Iceland has
belonged to the little known European
Economic Area. The EEA was originally
a treaty between the EU and countries
that had belonged to EFTA, the European
Free Trade Association, originally found-
ed in 1960. Soon, three of the main EEA
countries, Austria, Sweden and Finland,
left to join the EU. Iceland stayed behind
with Norway and Liechtenstein.
PARTIAL MEMBERSHIP
According to the EEA Treaty, Iceland is part
of the EU in many ways. It enjoys free trade
with the EU and subscribes to the “four free-
doms," the free movement of goods, persons,
services and capital. As a counterpart, the
EEA countries are obliged to adopt many of
the laws of the European Union without hav-
ing any part of the decision making process
in Brussels. They also have to contribute fi-
nancially to the single market—well, rich Nor-
way pays a lot, Iceland not so much.
Since 2001, Iceland also belongs to the
Schengen Agreement, which entails a bor-
derless zone covering 25 European coun-
tries. In this sense Iceland is more ingrained
within the EU than the UK and Ireland, who
decided not to participate in Schengen.
A STRANGE BALANCING ACT
So in many ways Iceland has been integrated
into Europe over the last decades. It is now
much more a part of Europe than it was in the
time when the Americans operated a large
military base in Keflavík, while the country
was at the same time doing lively trade with
Russia—trading herring and wool for oil and
Russian cars, a common sight on the streets
of Reykjavík in the sixties and seventies. This
was a strange balancing act, which can be
explained by the relative strength of commu-
nists in Iceland after the Second World War.
One of the touchiest matters in post-col-
lapse Iceland are the UK and Dutch branches
of the Landsbanki bank’s Icesave savings ac-
counts, which will probably have to be reim-
bursed by Icelandic tax-payers. This matter
will be settled according to European law
and perhaps ultimately in a European court.
The regulation of the now defunct Icelandic
financial market mainly came from Europe—
even if it was not always heeded.
QUESTIONS OF SOvEREIGNTY
Icelanders’ view of the EU is quite paradoxi-
cal. The key word is sovereignty. As previ-
ously stated, Iceland adopts much of the
EU legislation, but has absolutely no say in
it. For an independent country this might
seem intolerable. Iceland has to lobby in the
corridors of Brussels against EU legislation
that might prove harmful for the nation’s in-
terests, but then again Iceland doesn’t really
have the clout to influence decision making
in Brussels.
Many would claim that Iceland really
gave up much of its sovereignty when it
joined the EEA, and that it would have been
normal to hold a referendum on the treaty
and to alter the constitution correspondingly.
In retrospect this seems to be right. However,
even those who opposed the EEA in the be-
ginning soon accepted it. Belonging to the
EEA was obviously a factor in the good times
enjoyed by Icelanders in the era leading up to
the economic collapse of 2008.
ANATHEMA TO LEFTISTS
EU membership divides the nation—and the
debate is set to become very tough. The
politics of the matter are quite complicated.
Only one party is absolutely in favour of join-
ing the EU, The Social Democratic Alliance
(Samfylkingin)—the party of PM Jóhanna
Sigurðardóttir—presently parliament’s major-
ity party, and the most internationally minded
of the Icelandic political parties. When the
current left wing government was formed
in the spring of 2009, the Social Democrats
were adamant that a EU application would be
high on the government’s agenda.
This was very awkward for the junior par-
ty in the government, Vinstri-Grænir (‘The
Left Green Party’), most of whose members
oppose the EU. But the Left Greens reluc-
tantly went along, knowing that otherwise
they might be left out of the coali-
tion government.
So the social
demo c r a t s
triumphantly
sent in an ap-
plication last sum-
mer—and now the formal
negotiations are set to begin.
In the present climate of total mistrust in
politics—a joke party recently won 35 percent
in the Reykjavík municipal elections—this is a
very difficult matter to resolve. The leaders
of the Left Greens are accused of having be-
trayed their electorate by agreeing to the EU
application. This is one of the reasons why
the party, which looked so coherent in op-
position, is now in a state of total disarray.
Another one is that its chair, Finance Minis-
ter Steingrímur J. Sigfússon, is perceived as
kowtowing to the IMF, which is anathema to
the leftists in his party.
EUROPHOBIA
The right wing Independence Party, histori-
cally the largest party in Iceland, is divided
on the EU. It has a very loud, somewhat xe-
nophobic, fraction that absolutely detests
the EU and everything connected with it. The
level of Europhobia is comparable to what
you would find on the extreme fringes of
the British Conservative party. This is led by
Davíð Oddsson, former Prime Minister, then
Central Bank Governor, who, surprisingly—
given that he was one of the main actors of
the collapse—is still around, now as editor of
the daily newspaper Morgunblaðið.
The party also has a pro-Europe wing,
but this is much more muted; the EU fraction
is cowed by the shrillness of the Euroscep-
tics. The party’s chair, Bjarni Benediktsson,
is very indecisive, though he appears to be
more against than for. For membership to be
accepted by the parliament and the nation, it
is thought imperative that at least a part of
the Independence Party be in favour. In due
time the party might even split on the issue,
but at the moment the Eurosceptics have the
upper hand.
The Independence Party is tradition-
ally the party of power in Iceland, the party
of business, and it still represents business
interests, even if it made a terrible mess of
things before the crisis. The attitude of the
business community towards the EU is com-
plicated. Basically industry, technology and
commerce are for joining, whereas fisher-
ies and the agriculture industry are strongly
against it. The fisheries and farming lobbies
are very strong within the political parties
and in the media.
LACK OF LEAdERSHIP
The Eurosceptics within the Independence
Party are demanding that the membership
application be withdrawn, and some of the
Left Greens agree. However this will hardly
happen if the present government holds out,
and even if it falls it might be considered too
late or undiplomatic to withdraw the applica-
tion. So the process muddles through. Brus-
sels knows that there are doubts and that a
future treaty might be voted down—in a re-
cent poll up to 70 percent said they would
vote no in a referendum.
The main obstacles in the negotia-
tions with the EU are fisheries
and farming, as well
as currency matters.
Through the EEA Treaty,
Iceland is very integrated
into Europe so other mat-
ters are quite easy to re-
solve; much of the legisla-
tion has already been adopted.
But this is also a question of leader-
ship: the present leaders of The Social
Democrat Alliance are not great thinkers or
charismatic people, and they seem to be un-
able to counter the anti-EU forces with argu-
ments that might sway the public opinion.
THE MYTH OF THE SIEGE
Throughout the Cold War, Iceland was in the
US camp. The Americans even bought fish
we could not otherwise sell. Then the Ameri-
cans left, and the military base in Keflavík
is now a ghost town. It didn't even help that
then-PM Davíð Oddsson sang a birthday
song for George W. Bush in the White House,
a cringe worthy moment. At the time of the
collapse, Iceland felt it had no friends. No-
body wanted to lend us money to save the
economy—which would have been to late
anyway, considering the magnitude of the
cock up.
Scandinavia said no, and the US didn’t
seem to care. Mervyn King, governor of The
Bank of England, offered the help of central
banks to reduce the size of the banking sys-
tem. This was not heard of until recently—an
amazing blunder on the half of the Icelandic
Central Bank and the government. One of
the more rampant Europhobes even wrote
a book called The Siege, claiming that Ice-
land had been betrayed by its former friends.
The Special Investigative Committee’s re-
port does not bear this out; in 2.000 pages
it maps the collapse and concludes that we
Icelanders mostly have ourselves to blame
through allowing our banking system to be-
come twelve times the size of the GDP, by the
overvaluing of our currency and by immers-
ing ourselves in debt.
THE RUSSIAN LOAN
We’ve had some very strange events occur-
ring lately. In October 2008, during the last
days of the collapse, Davíð Oddsson, then-
governor of the Central Bank, appeared in the
media claiming that the Russians had offered
to lend Iceland a huge sum of money, maybe
enough to see us through the crisis. Geopo-
litically, this would basically have amounted
to the Russians buying up the country, but all
the same, the news was surprisingly well re-
ceived. However, some drew a link between
this and alleged Russian involvement with
the Icelandic financiers; a bit later former
oligarch Boris Beresovsky said on Sky News
that the Icelandic banks had been used to
launder dirty money from Russia.
In the end the Russian loan turned out to
be a fantasy, and the Russian economy soon
found itself treading in deep water. This dem-
onstrated how unsure the Icelanders were of
their place in the world. Russians were per-
ceived as an alternative to the EU and the
IMF. There is a local saying originated by
Nobel laureate Halldór Laxness, Iceland's
greatest writer, who has one of his heroines
exclaim: “If I can’t have the best man, then let
me have the worst one.”
THE CHINESE SHOW UP
Strange things are still happening. A few
days ago a delegation of Chinese leaders,
fronted by a top politburo member, showed
up in Reykjavík, drove around town in a
big mobile convoy and doled out credit to
the Icelanders. Their visit had not been an-
nounced in advance, so this was a bit of a
surprise. The Chinese also have a very big
embassy in Reykjavík. Many ask in light of
Iceland’s vulnerable position: What do the
Chinese want from this small nation here in
the high north?
vICIOUS dEBATE ON EUROPE
Back to Europe. It has been proposed, nota-
bly by former leader of the Social Democratic
Alliance Ingibjörg Sólrún Gísladóttir, that
the EU application be put on hold for some
years. This might be a clever compromise in
light of the very volatile political situation and
also because Europe at the moment, with
its Euro crisis, seems to be in a mess. It is
quite unclear where the EU will go from here,
whether the Eurozone will break up, or if we
will see a more centralised economic regime
in Europe.
There are signs that the debate on Europe
will become extremely vicious. Icelanders are
not very good at discussing ideas; arguments
in this country very quickly become very per-
sonal. Attempts at reform, badly needed in
a country riddled with debt, are being
blocked because they are perceived
as being part of the EU programme. It
must be said, one is apprehen-
sive about having to listen
to this debate for the
next years—a refer-
endum on the
EU, which
will be held
after a treaty
has been con-
cluded, will surely
divide the nation.
Words
By Sophia van Treeck
With foreword
By Haukur S Magnússon
Feature | The European Union