Iceland, which applied to join the European Union (EU) after being pushed by the 2008 financial crisis, has given up on its own the chance to restart accession talks after 17 years. The Icelandic government urged the public to restart EU accession talks, citing Arctic security and trade wars, but voters appeared concerned that the fishing industry and control over its waters would shift to the EU.
According to a tally by Iceland's public broadcaster RUV, in a referendum on the 29th asking whether to restart EU accession talks, the "no" camp led the "yes" camp by 5.6 percentage points. The "no" vote was 52.8% and the "yes" vote was 47.2%. Reuters, citing an EU diplomat, said it was "a clear blow to EU leadership" and noted that "fisheries and independence issues were decisive."
The vote drew strong interest, with turnout reaching 82.5% across Iceland. However, of the six constituencies nationwide, only two districts in downtown Reykjavik, the capital, returned more votes in favor of restarting EU accession talks. In the remaining four constituencies—suburbs of the capital area and rural and fishing regions—"no" led "yes" in all.
In the 2008 European financial crisis, when its three major banks collapsed at once, Iceland applied to join the EU the following year to enter the eurozone (countries that use the euro). But four years later, a government that championed skepticism about EU membership shelved the talks. This vote was held to ask whether to resume the accession talks suspended in 2013. The Icelandic government had initially planned to first restart the accession talks, then hold another referendum on the final terms after negotiations concluded.
The current Icelandic left-wing coalition government led by Prime Minister Kristrún Frostadóttir argued that EU membership would serve as a shield against trade wars and Arctic competition. In Iceland, the argument that "EU membership is needed to strengthen the security net" has gained traction recently as the United States has turned its attention to Greenland and Russia and China have continued attempts to expand their influence in the Arctic. Iceland is a member of the North Atlantic Treaty Organization (NATO) but has no standing military, relying on allied forces for defense. Ahead of the vote, the government also adopted the slogan "now or never" and encouraged a nationwide turnout. Reuters, citing an EU official, reported that "in a phase where Arctic security is at stake, if Iceland were to join, it was expected that skepticism about the EU's role would ease even among EU member states."
The opposition camp countered this security argument by putting forward the protection of fisheries, a national livelihood. In Iceland's gross domestic product (GDP), the fisheries sector is a massive industry, accounting for 15% when direct and indirect contributions are combined. Fish account for 40% of Iceland's exports. If it joins the EU, Iceland would have to cede waters in line with the Common Fisheries Policy framework, under which member states share catch quotas.
The Icelandic government emphasized its location relatively far from other European countries, saying, "For decades, EU member-state fishing vessels have not entered Icelandic waters. Control will remain as is," but the public did not believe this explanation. Guðrún Hafsteinsdóttir, the opposition leader who led the anti-EU accession campaign, told Reuters, "The EU may promise policy flexibility at first, but we know that promise will not last."
The pro-membership camp urged support until the end of voting, arguing that adopting the euro could significantly help stabilize Iceland's prices and interest rates. The Central Bank of Iceland's policy rate is 8% per year, 3.6 times the European Central Bank (ECB) policy rate of 2.25%. Compared with Korea's policy rate of 3% per year, it is higher by 5 percentage points. Vilhjálmur Hilmarsson, chief economist at the major Icelandic union VR, said, "Introducing the euro will not resolve the structural flaws of Iceland's economy, but it could be a catalyst to make economic conditions more sound." The opposition, however, countered, "Iceland's economic problems are not for the European Commission to solve. They are problems Icelandic politicians must solve."
Experts predicted that after this vote, negative perceptions could grow within the EU about the sort of economic privileges Iceland has enjoyed despite not being a full EU member, and even accusations of free-riding could emerge. Although Iceland has not joined the EU, since 1994 it has participated in the European Economic Area (EEA) along with other non-EU European countries such as Norway and Liechtenstein. Participation in the EEA allows the movement of people, goods, services and capital much like EU member states. It is also part of the Schengen Agreement, which allows crossing borders without a passport. In return, it is excluded from economic alliances that require participating countries to shoulder responsibilities, such as the Common Fisheries Policy, the Common Agricultural Policy and the customs union. At a press conference on the 30th, after accession talks fell through, Prime Minister Frostadóttir said the government would further strengthen this EEA agreement, noting, "Through this vote, the government realized that the public is satisfied with the EEA agreement."
Bilborg Asa Guðjónsdóttir of the University of Iceland's Institute of International Affairs told Reuters, "Most Icelanders have offset the burden of prices and interest rates with high wages," adding, "There is no urgent economic need to hurry into EU membership."