Iceland’s EU Referendum: implications for Scotland?

Iceland’s new government took office on 21^st December last year and almost immediately announced, through its foreign minister, its intention to hold a referendum “on the continuation of Iceland's European Union accession talks” no later than 2027. Iceland’s new prime minister, Kristrún Frostadóttir, also announced her intention to set up an expert panel on the pros and cons of joining the euro.

Any new potential EU accession candidate is always interesting. But Iceland is not only already in the European Economic Area (EEA), it also started accession talks with the EU back in 2010 (for a detailed back story on this the chair of the European Movement UK, Mike Galsworthy, has written a great blog here). These talks were aborted in 2015 – and while it’s not clear that they were formally ended, you won’t find Iceland on the European Commission’s current list of candidates.

So, this is a new political step by Iceland’s new government, at a time of deep geopolitical uncertainty – unstable times that already led Finland and Sweden to join NATO in the last two years, and with incoming president Trump’s declared wish to takeover Greenland adding to Nordic jitters (even as I write this blog, Trump has now said he can’t rule out force in taking over Greenland and the Panama Canal, unpredictability looms).

Whither the EEA and EFTA?

As Mike Galsworthy says in his blog, Iceland’s move – amongst other questions – raises interesting questions for the future of the EEA and EFTA (the European Free Trade Agreement). Would the EEA really continue if its only EFTA members were Norway and Liechtenstein? Mike Galsworthy references an article by Professor Per Christiansen who argues it would undermine the EEA.

The EU27 are also EEA members but they would have no reason to maintain the body without the EFTA states being in it.

And it’s worth noting too that Switzerland – EFTA’s fourth member, never in the EEA – has just concluded a closer bilateral treaty with the EU, giving it more access to the single market in return for free movement and a greater financial contribution. This deal has yet to be ratified. But closer EU ties emerging from two of the EFTA four states is certainly interesting.

Norway doesn’t look set to re-open its EU debate any time soon, referendums in 1972 and again in 1994 having rejected this option. But it may well add to discussion of the issue. Still, Switzerland’s specific bilateral EU deals over the last 30 years – since the Swiss public also rejected joining the EEA back in 1992 – also show that the EU can keep one-off deals going. So, if it can do it with Switzerland, why not with the EEA even if it was only Norway and Liechtenstein? But long-held positions can change rapidly in these times – as we’ve seen from Ukraine’s EU candidacy to Finland and Sweden joining NATO.

Implications for Scotland?

What, if any, implications does this have for those who look towards an independent Scotland in the EU – or in the EEA?

Russia’s war in Ukraine in the last almost three years pushed the EU into giving Ukraine, Georgia and Moldova candidate status (though talks are currently suspended with Georgia). And, up to a point, the stuttering enlargement process with several western Balkan countries has also seen somewhat of a new dynamic as a result.

What will be particularly interesting, if Iceland does restart talks with the EU, is how fast that process might move, given Iceland is already in the EEA and so already meets the single market criteria that are so core to EU membership. An Iceland accession process moving ahead of all the other current candidates is quite likely.

Speed

A swift process for Iceland would demonstrate that an independent Scotland applying to join the EU could move relatively fast too. Scotland, given Brexit, no longer meets all the EU single market criteria – and the Scottish government has not kept to its goal of keeping aligned to EU laws in environment and agriculture. But Scotland would still, for now, be in a relatively good position to have a fairly speedy accession process.

The Euro

The determined moves by Iceland’s new government also underlines that joining the euro is not a question to be simply kicked into touch, as the Scottish government is wont to do. It may be the case that once in the EU, a member state cannot be forced to join the euro. But it certainly has to make a genuine political commitment to do that before joining.

A Seat at the table

Iceland has a population of almost four hundred thousand people. It’s ten times bigger than Liechtenstein but smaller than Malta – the EU’s smallest member state. But still, Iceland’s new government clearly sees that the political benefits of having a seat at the EU table, and a voice and a vote, are desirable compared to being a rule-taker in the EEA.

Scotland’s population size actually puts it pretty much in the middle of EU states by population size. One of the EU’s big pluses has always been its ability to manage both economic and population size differences in the way it operates and takes decisions. And an Icelandic accession would underline this – if a country more than ten times smaller than Scotland by population sees political benefits from being in the club, why wouldn’t Scotland?

The EEA option?

Does this change the arguments for the EEA option that some, including the Alba party, have made as an alternative to independence in the EU?

It certainly provides food for thought. No state has ever aimed to join the EEA since its initial founding in 1994 when the three states – Norway, Iceland and Liechtenstein – became members. In that same time period, the EU has expanded by 16 members (and then lost one, the UK) – and the EU, today, has 10 actual and potential candidate countries wishing to join.

If one of the three EEA/EFTA countries were to shift to the EU, it certainly raises questions about the EEA’s future. And it underlines the already existing question of why an independent Scotland would choose to be a passive rule-taker in the EEA, rather than have a seat at the table in the EU.

Some have suggested that the EEA route would be quicker for an independent Scotland. But none of the EU’s candidate countries since the EEA was formed three decades ago have chosen to go the EEA route. Rather, they’ve gone straight for EU talks – agreeing trade and association agreements with the EU while the accession process unfolds.

The 30 states in the EEA (the EU 27 and the EEA/EFTA 3) would have to agree unanimously if Scotland did, bizarrely, go down the EEA route. And there would be equally tough accession talks on all dimensions of the EU’s single market in order to join.

All of these arguments have been set out often enough in Scotland’s independence debate. But if Iceland does take up its EU accession talks again soon, then that will highlight even more the weakness of the ‘independence in the EEA’ arguments.

The Nordic Dimension

A renewed Icelandic accession process will add an interesting Nordic dimension to the EU’s current challenging enlargement process to its east and south-east. And it also highlights how northern European countries are responding to growing geopolitical challenges and uncertainty. The Scottish government has often liked to underline Scotland’s northern European credentials and its links to Nordic states. And, for sure, Iceland as a potential new EU member state in the coming years, will add into Scotland’s own EU debate in the future.