Norway almost as deeply integrated in the EU as the UK

When we think about Norway and the European Union, Britain tends to surface. But what is Norway's EU relationship in reality?


Media shortcut

EurActiv alerted me to the publication of the study on future EU relations of Norway. The article presents the current position of Norway as a member of the European Economic Area (and member of the European Free Trade Associaiton EFTA), as well as the main findings and quotes from Norwegian experts.

When Kirsty Hughes offers the main points on BBC News, Britain crops up early on:

"We are almost as deeply integrated as the UK," says report committee chairman Prof Fredrik Sejersted.

Views and News from Norway contribute with an assessment of the opinion climate in the country, and predict that the current relationship will continue with little change.


Official information

The Norwegian Ministry of Foreign Affairs offers a press release about the review of Norway's agreements with the European Union. The study forms the basis for a white paper on EU relations to be published later this year, says foreign minister Jonas Gahr Støre.

Chapter 1 (17 pages) of the massive report Outside and Inside – Norway's agreements with the European Union (Official Norwegian Reports 2012:2) is available in English. It offers and introduction, the main messages and an overview.

Readers of Norwegian are able to find the relationship explored in painstaking detail in the original, which runs to 911 pages including the annexes:

Utenfor og innenfor – Norges avtaler med EU (NOU Norges offentlige utredninger 2012:2, 17. januar 2012)


Some thoughts

In the wake of the national leaders' inability to solve the crisis in the eurozone, between seven and eight Norwegians out of ten are now opposed to EU membership. Thus, Norway seems set to continue the necessary ties with a huge democratic deficit.

The EU accession of Norway's EEA companion Iceland (some EU views here) would strain the agreement on the European Economic Area, but I would be astonished if the population of Iceland actually decided to join in the upcoming referendum even if the negotiations lead to an agreement.



Ralf Grahn

P.S. Those of you who are interested in the European online public space, as well the issues of information and propaganda from the institutions of the European Union, should read Mathew Lowry's blog article about an alternative overaching EU communication strategy.

EU view of EFTA and EEA country Iceland (not excluding controversy)

Iceland has been getting a lot of attention in Brussels lately. The EU Commission presented its progress report and conclusions regarding the process of Iceland to become a member of the European Union:

Grahnlaw Suomi Finland: EU enlargement: Iceland (20 December 2010)

The General Affairs Council (GAC) adopted conclusions on enlargement, including Iceland, on 14 December 2010:

Grahnlaw: EU Council on enlargement: Iceland (20 December 2010)

But the same day, the General Affairs Council also adopted conclusions about the relations between the European Union and the members of the European Free Trade Association (EFTA), as described on Grahnblawg (in Swedish): EU-relationerna med Norge (19 December 2010).

Naturally Iceland, an EFTA member and a participant in the European Economic Area (EEA) was dealt with in these GAC conclusions as well:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010


EEA remarks

The Council was satisfied with the contributions from Iceland, Liechtenstein and especially Norway to poorer EU member states (point 2):

The Council appreciates the financial contributions of the EFTA countries to the economic and social cohesion in the European Economic Area (EEA). Norway, Liechtenstein and Iceland (the "EEA EFTA States") recently committed themselves to a substantial increase of their continued contributions.

In practice the EEA states pay for access to the internal market, although it differs somewhat from the membership contributions from EU countries.

The Council was happy to note the excellent transposition record of the EEA EFTA states (point 3):

Iceland, Liechtenstein and Norway are integrated in the internal market through the EEA Agreement of 1994. This Agreement functions properly so long as all Contracting Parties incorporate the full body of the relevant EU acquis relating to the internal market into their national law. The Council welcomes that the EEA countries have demonstrated an excellent record of proper and regular incorporation of the acquis into their own legislation and encourages them to maintain this good record to ensure the continued homogeneity of the internal market.

The GAC remarks about homogenous implementation of EU law and the smooth functioning of the special institutions are directed at all EFTA countries (point 7):

Though EU relations with the EFTA countries were extended over the years to many areas not covered by the internal market, these relations are mainly based on the progressive integration of the EFTA countries' economies into the EU internal market. In view of the need for a level playing field for all economic operators of the parties concerned and the continued development of internal market relevant acquis, the EU and the EFTA States should ensure homogeneity in the implementation of the acquis and the good functioning of the institutions.

Icelandic accession negotiations

Officially, Iceland conducts negotiations to become a member of the European Union, which puts it in a different category from the other EEA states, Liechtenstein and Norway, with the remaining EFTA member, non-EEA Switzerland even farther apart. The GAC stated the position of Iceland (point 5):

The Council welcomes the opening, in July 2010, of accession negotiations with Iceland, which conserves its status as EEA EFTA State while negotiations are ongoing.

Specifically Iceland

The GAC conclusions contained a number of points specifically related to the EU's relationship with Iceland (10-16):

ICELAND

10. The Council welcomes the launching of accession negotiations with Iceland in July 2010, takes note of the findings presented by the Commission on 9 November 2010 to the Council and the European Parliament in its Progress Report on Iceland and refers to the Council conclusions on enlargement - Iceland - to be adopted by the General Affairs Council on 14 December 2010.

11. The opening of an EU delegation in Reykjavik in 2010 will contribute to the rapprochement of Iceland and the EU in this dynamic phase of relations.

12. The Council appreciates the solidarity shown by the Icelandic people when committing to renew their contribution to the reduction of social and economic disparities in the EEA for the period 2009-2014.

13. While accession negotiations are ongoing, the EEA Agreement remains the key contractual basis for EU-Iceland relations. In the past two years, Iceland continued to be an active and constructive partner in that framework as well as in the Schengen area, with a good record of implementation of the evolving EU acquis. The Council encourages Iceland to maintain the same good record also in the future.

14. The Council welcomes the good cooperation with Iceland in many areas of common interest, in particular on environmental and energy issues, as well as in the field of Common Foreign and Security Policy, with Iceland frequently supporting EU declarations and voting together with the EU in the UN. The Council is looking forward to further strengthening cooperation with Iceland on issues such as Arctic policy, the Northern Dimension, fisheries, renewable energy and climate change.

15. Regarding fisheries, the Council continues to call for a constructive approach of all Coastal States (EU, Norway, Faeroe Islands and Iceland) on the joint management of mackerel fisheries, and encourages Iceland to resume negotiations on this issue, in particular as regards a reasonable long term sustainable quota sharing arrangement, taking into account the track records of all relevant actors.

16. The Council welcomes Iceland's continued commitment to move toward economic stabilization and to address all issues deriving from the 2008 banking collapse. In this context, the Council recalls the need for Iceland to address existing obligations, such as those identified by the EFTA Surveillance Authority under the EEA Agreement, as well as weaknesses in the area of financial services, identified in the Opinion of the Commission on Iceland's application for EU-membership.

”Mackerel War”

As we saw, the last two points referred to controversial issues. In point 15 the GAC called for the resumption of negotiations in the ”Mackerel War”. Se for instance:

FISHupdate.com: Iceland and Faroes set to announce new mackerel quotas (20 December 2010)

FISHupdate.com: Lochhead comments on Iceland's 'irresponsible' mackerel quota action (20 December 2010)

BBC Scotland: Scottish fishermen condemn Iceland mackerel quota move (18 December 2010)

Fishnewseu.com: Iceland warns that Norway and EU will overfish mackerel next year (20 December 2010)

Icelandic Ministry of Fisheries and Agriculture, press release: Decision on Iceland's Share in Mackerel Fisheries in 2011 (20 December 2010)


Icesave / Landsbanki

The catastrophic fallout from the Icelandic banking collapse has haunted the people of Iceland and its government, but also relations with the Netherlands and the United Kingdom (point 16). See for instance:

Reuters: Iceland finance minister presents new Icesave bill to parliament (16 December 2010)

Eygló Svala Arnarsdóttir in Iceland Review Online: Icesave: Not my headache (ESA) (17 December 2010)

Bloomberg: Grimsson Says He'll Decide by February on Icesave Referendum (20 December 2010)



Ralf Grahn



P.S. In the blog post Not losing sight of the basics, Mathew Lowry calls on the EU institutions to do some serious work on Europa and other websites to serve a huge array of audiences. Read the discussion as well.

EU Council on enlargement: Iceland

My previous blog post looked at the conclusions of the EU Commission regarding the accession negotiations of Iceland: EU enlargement: Iceland (20 December 2010).

The member states of the European Union hold the keys to membership, so there is cause to present how the Council responded. The General Affairs Council referred to the communication from the Commission of 9 November 2010 on the Enlargement Strategy and Main Challenges 2010-2011 [COM(2010) 660], as well as the progress report “Iceland”, in:

Conclusions on enlargement and stabilisation and association process as adopted by the Council (General Affairs) on 14 December 2010 (document 17917/10)

The specific remarks with regard to Iceland are found on page 8:

Iceland

The Council recalls that, following the Commission’s recommendations in its Opinion of February 2010, accession negotiations with Iceland were opened on 27 July 2010.

Iceland is a long-standing functioning democracy with strong institutions and close ties with the EU. The overall level of preparedness to meet EU acquis requirements remains good, in particular due to Iceland’s membership of the European Economic Area (EEA) and the Schengen agreement. Iceland can be considered a functioning market economy, and could regain the capacity to deal with competitive pressure and market forces within the single market over the medium term.

Negotiations will be aimed at Iceland integrally adopting the EU acquis and ensuring its full implementation and enforcement. In line with the Negotiating Framework, the fulfilment of Iceland’s obligations under the EEA Agreement, taking full account, inter alia, of the European Council conclusions of 17 June 2010, as well as Iceland’s progress in addressing other areas of weakness identified in the Commission’s Opinion, will guide the advancement of negotiations.

In this context, the Council looks forward to the results of the screening process.

Icelandic Ministry for Foreign Affairs

The Icelandic Ministry for Foreign Affairs offers detailed pages in English on Iceland's application for membership of the EU, and the pages Latest news show that the screening process on different areas of legislation advance rapidly, with meetings on financial services, free movement of goods, competition policy, information society and media, company law and public procurement in little more than a month.

But the Council conclusions had not yet been included among the Key documents, and the government has had little to say of late.


Media

Official conclusions usually need to be supplemented by media reports and opinions to give the lay of the land. Here are a few samples.

IceNews, Michael Huguenin: Icelanders Frosty Towards EU Membership (14 November 2010)

IceNews: Icesave contracts leaked online (14 December 2010)

Iceland Review Online: Iceland walks out of mackerel meeting (15 December 2010)

Iceland Review Online: Iceland: EU and Norway Responsible for Overfishing (16 December 2010)

The Economist: Coming in from the cold (16 December 2010)



Ralf Grahn



P.S. This is for people with an interest in EU law and politics. On Polscieu, his blog on the Ideas on Europe platform, Ronny Patz wrote an interesting entry about the legal web portal of the European Union: A new EUR-Lex: Finding documents 2.0? What if people actually found what they are looking for...

Iceland not joining the European Union?

Love’s Labour’s Lost?

Iceland has applied for EU membership and answered the detailed questions posed by the Commission, which is preparing its opinion for the Council on starting membership negotiations.

On the face of it, matters have advanced at lightning speed (according to European Union enlargement standards), but somehow the feeling surrounding the membership application is surreal: The government has applied to become a member and appointed its chief negotiator, but the population of Iceland will probably reject accession, if matters ever advance that far.

Geographically (and mentally?) Iceland is situated between Norway, which has twice rejected a final accession agreement, Greenland, the only territory to leave the European Union, the United Kingdom, where public hostility to and ignorance of European integration reign, and Ireland with its patchy record of referenda.

The latest opinion polls show that Iceland will probably continue as a member of the European Free Trade Association (EFTA) and the European Economic Area (EEA), which guarantees access to the internal market of 30 states, but excludes agriculture and fisheries.


“Fax democracy”

The EEA agreement is in effect since 1994, which explains the antiquated term “fax democracy” for the adoption of the EU’s internal market legislation, without much say over its contents. The EEA countries also contribute to the EU budget.

Paradoxically, defenders of national sovereignty prefer quasi-automatic reception of EU law on the grounds that membership means loss of self-determination. Admittedly, the voting weight of a state with 320,000 inhabitants is limited among (now) 27 member states with a total population of 500,000,000. But smallest states are actually over-represented in the EU institutions and they sit at the tables where the decisions are hammered out. Still, noises about demanding extra representation are ill-boding.



The fishing industry still provides almost 40 per cent of Icelandic export earnings and it employs 8 per cent of the work force, so the common fisheries policy of the European Union is going to be a crucial question during the negotiations. A protectionist population will most probably reject any deal seen as disadvantageous (giving fishing rights to “foreigners”), but one may ask why the European Union should concede membership rights to a country, which sees contributions as a one way street.


Further reading

Here are some suggestions for further reading for those, who want to take a closer look at the Icelandic EU prospects.



Mats Engström: Progress on Enlargement (8 November 2009)



Reykjavik Grapevine, Paul Nikolov: Poll: EU Referendum Would Fail if Voted On Today (6 November 2009)



Jón Frímann Bloggar: Smear campaign against EU in Iceland (8 November 2009)



Vanderbilt Business, Ólafur Arnarson: Iceland meltdown (November 2009)



Iceland Review: Iceland’s EU Negotiation Committee Appointed (5 November 2009)



Iceland, Ministry of Foreign Affairs: Iceland’s negotiation committee appointed (4 November 2009)



Iceland, Ministry of Foreign Affairs: The Icelandic Government submits answers to a Questionnaire from the European Commission (22 October 2009)



Wikipedia: Accession of Iceland to the European Union



Leigh Phillips on EUobserver: Concern over Iceland EU bid as public support tanks (6 November 2009)




Ralf Grahn



P.S. Read about the real EUSSR through the good, the better and the best Euroblogs on multilingual Bloggingportal.eu. Propose an interesting blog post or a whole new blog (click Contribute).

Iceland starts EU membership talks?

Today, 28 May 2009 the government of Iceland is going to put forward a proposal for authority to start negotiations on membership of the European Union.



If the Althingi (Parliament) grants the authority, Iceland is in “pole position” for accession due to its membership in the European Economic Area (EEA). Despite its severe economic crisis, Iceland is a stable democracy. Its Parliament, Althingi, evokes the longest parliamentary tradition in the world. It was established as a legislature and judiciary in 930. Iceland became a member of the Council of Europe in 1950.

Acquis communautaire

The internal market legislation of the European Community (European Union) is already in force. In addition, as an EEA country Iceland participates in a number of other policy areas and EU programmes.

Iceland participates in the Schengen area abolishing internal border controls and improving controls on the external borders, and it is a member of the NATO alliance in common with the mainstream members of the European Union.

In other words, Iceland already fulfils most of the EU membership criteria, although internal political differences and the difficulties concerning fisheries and agriculture should not be underestimated.

We can compare the situation with the EFTA countries Austria, Finland and Sweden. They had negotiated the EEA Agreement, which entered into force at the beginning of 1994. But they went on to upgrade their relationship with the European Union through full membership, which entered into force exactly a year later, in 1995.


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Membership application: Yes or no?

Today, 28 May 2009 the new Icelandic government is going to propose that the Althingi (Parliament) grants it powers to apply for membership in the European Union.

Iceland’s Ministry for Foreign Affairs offers the following overview in English:



Proposal for a Parliamentary Resolution on Application for Accession to the European Union

(Submitted to the 137th session of Parliament 2009)


The Parliament resolves to empower the Government to submit an application for membership of the European Union and upon the completion of negotiations with the Union to hold a national referendum on a prospective membership agreement.


Comments on the Proposal for a Parliamentary Resolution

The proposal on application for membership of the European Union is submitted in order to give the Icelandic people an opportunity to reject or accept an agreement on accession to the EU once negotiations have been concluded.

The application to the European Union is thus not equivalent to membership, upon which, indeed, it is for the Icelandic nation to take the final decision. In addition, a legislative proposal will be submitted on the holding of national referendums on important matters that the Government or Parliament decides to submit to the nation.

Prior to the start of negotiations, extensive consultations will take place with interest groups on agreement objectives in various sectors, such as fisheries, agriculture and regional issues, in the field of public services, the environment, equal rights and currency matters, and the broadest possible consensus will be sought on the basis for negotiations. The possibility of closer monetary cooperation will be explored in parallel to the negotiations on possible accession in order to support the Icelandic krona. Emphasis is placed on an open and transparent process and regular information sharing with the general public and interest groups.

A Committee of professionals will be appointed by the Government of Iceland to carry out the negotiations with the European Union. The Committee will be supported by a broad-based consultative body representing different interest groups, from which the Committee will seek advice and which the Committee will keep informed on the ongoing progress of negotiations. Iceland as a European nation wishes to take an active part in the development of a democratic Europe built on the foundations of social justice, equality and the respect for human dignity and the environment. Europe is the cornerstone of human rights in the world, and an advocate for stability, sustainable development, justice and prosperity throughout the world.
Parties concerned reserve the right to advocate for or against any final agreement, bearing in mind that possible support is contingent upon various provisos.

Iceland’s vital interests include:

• ensuring the sovereign control of water and energy resources and their utilization.

• ensuring the sovereign control of the fisheries resources, the sustainable utilization of these resources, and a share of straddling stocks and as much representation of national interests in international agreements on fisheries as possible.

• ensuring thriving Icelandic agriculture based on food security and safety.

• ensuring the democratic right to manage public services based on social principles.

• defending the rights of workers and labour.

• achieving a favourable and growth based competitive environment for business in Iceland while at the same time taking account of unique factors owing to specific circumstances.

It is foreseen that Parliament will establish a special European Parliamentary Committee, in which all the political parties will be represented, to consult with the Negotiating Committee to the European Union.


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Iceland’s international relations


The (previous) Government of Iceland presented a report on Iceland’s international relations to the Althingi in March 2009. (The link is to an 11 page excerpt available in English.)





Ralf Grahn

European Economic Area (EEA) in practice

The European Economic Area (EEA) extends the four freedoms of the European Community to the EFTA states Iceland, Liechtenstein and Norway, giving them access to an internal market of 30 states and almost 500 million people. Agriculture and fisheries are excluded, but the EFTA EEA countries cooperate in other policy areas as well.

The basic document is the Agreement on the European Economic Area. More information is available on the EFTA web pages about the EEA Agreement.



Quick overviews are offered by a number of EEA fact sheets.


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Technical adaptation

The European Community (European Union) legislation in the relevant areas is constantly evolving. The purpose of this blog post is limited: to show how “technical” new provisions are adopted by the non-EU members. Article 98 of the EEA Agreement spells out the mechanism for amending the Annexes to the Agreement, as well as the Protocols mentioned:

Article 98

The Annexes to this Agreement and Protocols 1 to 7, 9 to 11, 19 to 27, 30 to 32, 37, 39, 41 and 47, as appropriate, may be amended by a decision of the EEA Joint Committee in accordance with Articles 93 (2), 99, 100, 102 and 103.



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In practice

The Official Journal of the European Union (OJEU) 28.5.2009 L 130 offers examples of recent Decisions by the EEA Joint Committee, numbers 21 to 39/2009 amending Annexes.


Joint Committee Decision 40/2009 amends Protocol 31 on cooperation in specific fields outside the four freedoms.



Ralf Grahn

Air Transport Agreement USA, European Community, Iceland and Norway

On the legal information portal Eur-Lex, under Preparatory acts, COM documents, the Commission has published two documents on the accession of Norway and Iceland to the EU-US Air Transport Agreement, creating market access for air carriers:


EU-US Air Transport Agreement


Brussels, 15.5.2009 COM(2009) 226 final:



Proposal for a
Decision of the Council and the representatives of the Governments of the Member States of the European Union, meeting within the Council

On the signature and provisional application of the Air Transport Agreement between the United States of America, for the one part, the European Community and its Member States, for the second part, Iceland, for the third part, and the Kingdom of Norway, for the fourth part; and

On the signature and provisional application of the Ancillary Agreement between the European Community and its Member States, of the first part, Iceland, on the second part, and the Kingdom of Norway, of the third part, regarding the application of the Air Transport Agreement between the United States of America, of the first part; the European Community and its Member States, of the second part; Iceland, of the third part; and the Kingdom of Norway, of the fourth part


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Ancillary Agreement


Brussels, 15.5.2009 COM(2009) 229 final:






Proposal for a

Decision of the Council and the representatives of the Governments of the Member States of the European Union, meeting within the Council

On the conclusion of the of the Air Transport Agreement between the United States of America, for the one part, the European Community and its Member States, for the second part, Iceland, for the third part, and the Kingdom of Norway, for the fourth part; and

On the conclusion of the Ancillary Agreement between the European Community and its Member States, of the first part, Iceland, on the second part, and the Kingdom of Norway, of the third part, regarding the application of the Air Transport Agreement between the United States of America, of the first part; the European Community and its Member States, of the second part; Iceland, of the third part; and the Kingdom of Norway, of the fourth part

Procedure number: 2009/0066 (CNS)



Ralf Grahn

Eurovision: Norway and Iceland – Nordics in EU

The Eurovision Song Contest migrates from oil and gas producing Russia to similarly employed Norway, but let us not draw too many parallels.

The European Economic Area (EEA) did rather well in the 2009 Eurovision Song Contest in Moscow. Alexander Rybak of Norway came out on top with Fairytale, and Yohanna from Iceland came second with Is It True?


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Norway

Today 17 May Norwegians have woken up to National Day (syttende mai), celebrated in an Independence Day atmosphere. Referendums have twice rejected membership in the European Union, and EFTA country Norway is a member of the internal market through the European Economic Area, the largest common market in the world with 500 million inhabitants. Norway participates in the Schengen Agreement on external border control and internal travel, as well as in various issues concerning the area of freedom, security and justice.

Norway is a wealthy and stable democracy, and it belongs to the top of the world in many international rankings.

Despite close cooperation, membership negotiations with the European Union are not part of Norway’s more serious Eurovision in the near future.


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Iceland

According the Iceland Review Online the new government of Prime Minister Jóhanna Sigurdadóttir is preparing a parliamentary resolution on launching EU membership talks, and has conducted advance discussions with the opposition parties.


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The resolution will be presented to the Althingi parliament next week, but it remains to be seen if Sigurdadóttir’s plan to submit a membership application in July will be approved by a parliament where most of the parties have resisted joining the EU.

Like Norway, Iceland is part of the fifteen year old EEA and the Schengen Agreement. Despite the financial disaster, Iceland is a stable democracy (with the world’s oldest parliament), rule of law, as well as Nordic quality governance and public services.

If the difficult issues, such as fishing rights, can be solved, most of the Community legislation (acquis communautaire) could be ticked off at record speed.

If matters advance that far, Icelanders would most probably decide on the membership in a referendum, but it is difficult to predict the outcome.


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Unenthusiastic Europeans?

People sometimes wonder that people in the Nordic countries inside the European Union are fairly unenthusiastic about the European project, and two still remain on the outside.

Denmark joined only in 1973, together with the United Kingdom and Ireland. Sweden and Finland became EU members even later, in 1995.

Norway and Iceland, as stated above, are still on the outside.

There are other causes, besides relatively short periods of EU membership. Despite high levels of taxation, Nordic citizens are justifiably proud of their economic and technological standards, quality of life, good governance, high quality public services and fairly equal societies.

EU (or continental) standards of governance are not necessarily perceived as improvements. Here the European Union has a lot to do, if it wants to be less of a let-down. On the other hand, only a constant willingness to learn and to improve will keep the Nordics in the top of the world leagues, so a degree of humility is not only becoming, it is a necessity.

The Eurovision of the Nordic EU members’ governments can hardly be described as enthusiastic, but generally as constructive and pragmatic.

Business interests hope for more decisive action by the EU to free world trade, to improve the internal market and to get the Lisbon Strategy for growth and jobs moving.

Citizens, perhaps grudgingly, gradually acknowledge the need for more Europe with regard to climate change, the environment, energy, development policies and peace missions.


Ralf Grahn

Elections in Iceland (continued) & Baltic states: perplexing euro adoption

Yesterday I admitted to being mystified by some Icelanders’ optimism regarding adoption of the euro currency, while rejecting membership in the European Union, or even membership negotiations.

Among the reasons for my perplexity in Iceland & EU: Monetary union only? (23 April 2009) were the existing exceptions, according to Wikipedia Montenegro, Kosovo, Andorra, Monaco, San Marino, the Vatican.



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FT Brussels blog

Today I see that Tony Barber of the FT Brussels blog had posted on another angle of the same problem: Hands up if you’d like to use the euro! (23 April 2009).



Barber appears to be as puzzled as I am over the fact that the Baltic states have laboured hard to become members of the European Union and to prepare for adoption of the single currency. But the European Central Bank refuses to ease the rules to let Estonia, Latvia and Lithuania in, despite the hardship caused by the economic crisis.

All the while, Montenegro and Kosovo have used and keep using the euro, without being members of the EU or subject to the rules of the economic and monetary union (EMU).

Amazing!

***

By the rules

Whether Iceland or new EU member states in Central Europe, my post yesterday only indicated the basic premises for the euro currency, by a quote from the Preamble of the Treaty on European Union (TEU).

If a country follows the rules, it has to:

1. Become a member of the European Union, and participate in economic policy coordination.
2. Fulfil the convergence criteria, also known as the Maastricht criteria (low inflation, budget deficit, government debt level, participation in the Exchange Rate mechanism, low interest rates).


Some humanity, solidarity, logic and enlightenment seem to be in order.


Ralf Grahn

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.

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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,
---


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EMU


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

Eurozone: UK and Sweden

The United Kingdom seems to be moving so far off from qualifiying for euro adoption that I wonder how Commission President José Manuel Barroso even bothered to discuss the matter in public. The convergence criteria (analysed earlier on this blog) spell out decent government deficits and participation in the exchange rate mechanism without devaluation. If the rule of law continues to be upheld, Britain is beyond the pale for many years to come, even if the political leadership had a change of heart. Having promised a referendum, Labour is in no position to join the eurozone for internal reasons either, even if the political class wanted to jettison the Pound Sterling.

Britain has opted out of options.

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Sweden is also outside the euro area, but without an opt-out. The Swedish Government did not bother to use the Lisbon Treaty negotiations to get one, but Sweden’s Government acts as if it had no obligation to adopt the euro currency.

Sweden’s updated convergence programme (Uppdatering av Sveriges konvergensprogram, November 2008) was published today:

http://www.regeringen.se/content/1/c6/11/66/99/b55c41d6.pdf

Despite the slide of the Swedish Crown, the tone of the Government is almost defiant (page 9):

“I september 2003 genomfördes en folkomröstning om Sverige skulle införa euron som valuta. Resultatet av folkomröstningen föranledde inga förändringar i penning- och valutapolitiken. Regeringen har ansvaret för övergripande valutapolitiska frågor och beslutar om växelkurssystemet medan Riksbanken ansvarar för tillämpningen av växelkurssystemet. Den nuvarande penning- och valutapolitiska regimen ligger fast. Sveriges erfarenheter av inflationsmål och rörlig växelkurs är mycket goda. En knytning av kronan till ERM2 är inte aktuell.”

In short, no change is in sight. Sweden does not contemplate joining the exchange rate mechanism (ERM II).

As long as the Commission continues to turn a blind eye, Sweden can flout the common rules.

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There have been some reports that Iceland contemplates adopting the euro, but without EU membership. Iceland would also have to fulfil the Maastricht criteria, in itself a hard task given the present meltdown. But how would Iceland participate in the rudimentary economic governance within the euro group, to say nothing about other policy areas outside the current EEA deal?


Ralf Grahn