Thursday, 23 April 2009

Iceland & EU: Monetary union only?

In two days (Saturday 25 April 2009) Iceland is going to vote on a new parliament, after the meltdown of the country’s financial sector and economy.

For a look at the background, you can read Iceland’s EU questions unanswered ahead of vote on EUbusiness (23 April 2009).

A few months ago, several reports indicated that the Icelandic population would be ready to change their status as part of the European Economic Area (EEA) into membership of the European Union. Later news items and blog posts have told us that many voters would want to adopt the euro currency, fewer would be prepared to start negotiations on EU membership, and even fewer imagine they would accept the accession terms.

Only the social democratic party (estimated to gain 31 per cent of the vote) is committed to EU membership.


Monetary union?

This situation has left me wondering if the voters in Iceland have secret knowledge, or if they are unwittingly optimistic about adopting a foreign currency.

Right at the start of the Treaty on European Union the Preamble states:

RESOLVED to achieve the strengthening and the convergence of their economies and to establish an economic and monetary union including, in accordance with the provisions of this Treaty, a single and stable currency,



The economic and monetary union (EMU) includes the common currency. Iceland is not a protectorate or an enclave, but a sovereign state. Could it dispense with economic union, meaning coordination of economic policies, the stability and growth pact and all the rest, and just go straight for the euro currency?

To my knowledge, there is no such indication in the treaties, but I am doubtful because of the existing exceptions, according to Wikipedia Montenegro, Kosovo, Andorra, Monaco, San Marino, the Vatican).

Or are the Icelanders thinking about adopting the euro unilaterally, without asking anyone?

I have to admit that I am mystified.

Ralf Grahn