Sovereignty mattered. Fish mattered. Cost mattered.
Earlier this year, Iceland’s (generally) left-of-center coalition government formally set off on the road to EU membership. The first stage would be to hold a referendum about whether to resume accession negotiations. If the answer was a yes, the government would then negotiate with Brussels, and if they came to agreement there would then be a “second referendum putting the question to the Icelandic voter whether Iceland should, in fact, join the EU.”
Resume negotiations? Yes, the origins of the cumbersome, but commendably democratic double referendum structure lay in the history of Iceland’s earlier (2009) bid for EU membership, begun in the wake of a financial collapse dramatic even by the standards of that time. This initiative was led by the governing left-wing coalition, but the process proved contentious (it is a long saga) and was put on ice after the left’s defeat in the 2013 election. There it stayed for the next decade. One idea that had emerged, however, was that there should be no relaunch of negotiations with Brussels without a referendum first. The current government has stuck with that, not least because one of the governing coalition parties is euroskeptic.
Historically, Iceland’s attitude toward the EU has been lukewarm. It has, along with two (Liechtenstein and Norway) of the other three EFTA members, been a part of the EEA, the European Single Market, for decades. This helps its business in the EU, without committing it to the bloc’s “ever closer union” and the loss of sovereignty that implies. There is something, however exaggerated, to the argument that this arrangement means that in those areas covered by the single market, Iceland is reduced to a rule-taker. On the other hand, if as an EU member Iceland had a seat at Brussels’s grim table it would be a very small one: Its population is only 400,000.
It should be noted that, although Iceland is in the EEA, it is outside the EU’s customs union. It can make trade deals independent of Brussels and does so either alone or in conjunction with EFTA, something it could not do from inside the EU. Moreover, joining the EU would mean that Iceland lost control of its emotionally potent and economically and strategically vital fish industry (fish account for around 40 percent of the country’s exports and altogether some 8 percent of GDP).
EU membership would have brought Iceland under the Common Fisheries Policy (CFP), which dictates rules on who can fish, where and when they can fish, and how much they can catch. Most of these quotas are determined every year after negotiations. Member states are then responsible for ensuring fishers do not exceed the limits.
In the lead-up to the referendum, a Gallup poll showed that 90% of Icelandic companies linked to the fishing sector opposed joining the bloc.
Brussels’s offers to be creative in this area were, given the way that the EU looks at any derogation from areas that are part of its acquis, treated with skepticism.
Writing in Economic Affairs last month, Hannes Hólmsteinn Gissurarson, a professor emeritus of politics at the University of Iceland, observed that “Icelandic fisheries are both sustainable and profitable, thanks to a system of individual transferable quotas, whereas the EU’s Common Fisheries Policy has largely failed.”
How unusual for a made-in-Brussels policy to fail.
Initial expectations were that voters would favor opening negotiations with the EU. President Trump’s ambitions for Greenland and not unrelated worries over the reliability of Iceland’s NATO guarantee (and by implication of its separate defense treaty with the U.S.) seemed likely to persuade previously skeptical Icelanders that it was time for their strategically located island (check out the importance of the GIUK gap) to join the EU.
Initial expectations were wrong.
Iceland is wealthy (its per capita GDP is one of the highest in the world) and its debt/GDP ratio was around 56 percent in 2025, down from a post-crisis peak of 136 percent in 2011. Its budget deficit was 2.8 percent. Thanks to hydropower and geothermal energy, it is self-sufficient in electricity.
Gissurarson:
Iceland would contribute far more to the EU than it would receive. Indeed, an EU official told the Brussels magazine Politico that it would be opportune for the EU if Iceland and Montenegro joined at the same time, so Iceland’s net contribution could cover Montenegro’s net cost.
Tactful? Not really.
Iceland’s economy could be doing better (GDP growth is sluggish, and both unemployment and inflation are relatively high), but it is hard to see how it would benefit from shackling itself any closer to the EU’s decaying hulk. To some in Iceland, the fact that the financial crisis had led to years of capital and exchange controls meant that replacing its lonely krona with the euro was one good reason to join the EU. On the contrary, it would be a bad reason for a bad decision.
There’s no easy option to do so, but if Reykjavik wants to toughen the krona’s defenses, it should establish a currency board under which the country’s reserves would be used to back a krona peg to the larger currency that made the most sense for Iceland’s economy. In 1992, Estonia used this mechanism to link its fragile reborn kroon to the deutschmark— with impressive results.
On Sunday, Icelanders rejected any accession talks with Brussels by 52.8 percent to 47.2 percent. What won the day for “nei” appears, ironically, to have been satisfaction with Iceland’s existing close relationship with the EU. Geopolitical concerns seem to have counted less than once thought, leaving voters to conclude that any marginal benefit from joining the EU would be outweighed by the drawbacks. Sovereignty mattered. Fish mattered. Cost mattered.
It was a wise choice.