Public support for adopting the euro has fallen off slightly, writes DAVID IBISONin Reykjavik
WHEN ICELAND’S banking system collapsed in October, even the most independent-minded islanders gazed across the North Atlantic to Europe for salvation. If only Iceland had been a member of the European Union and the euro zone, the argument went, it would have escaped the crisis and humiliation.
Four months later, however, as crisis-hit European countries such as Poland and Hungary consider joining the zone as quickly as possible, Icelanders are no longer looking overseas so rapturously.
The latest polls reveal less than 40 per cent now back an application to join the bloc, compared with a mid-crisis high of nearly 80 per cent.
The reasons for the fall-off are mixed. Fissures inside the euro zone between large members, such as Germany and France, and small ones, such as Greece and Ireland, are undermining its attractiveness to a tiny country. Icelanders see little point in enduring one currency crisis only to get embroiled in another.
“We are watching developments within the euro zone closely,” said Steingrimur Sigfusson, minister of finance, in an interview. “What will happen to the euro? We will take that into the picture.”
Others argue that, as Iceland has already undergone a crisis, there is little protection to be derived from joining the euro zone. “If we had had the euro, it would have made the collapse less spectacular,” said Gylfi Magnusson, minister for business affairs. “On the other hand, people point out that having a currency that has collapsed will help recovery in terms of exports.”
Politicians are also wary of public disquiet over implications for the island’s fishing industry, a valuable sector that is closely associated with the national heritage – as testified by the “cod war” against Britain in the 1970s.
Disquiet among the general public is matched on the political stage. Iceland’s new left-wing coalition government, comprising the Social Democratic Alliance and the Left-Green party, is split on the issue and its two most senior members, the premier and finance minister, do not see eye to eye.
Johanna Sigurdardottir, the prime minister and a Social Democrat, insists that joining the EU is the best option. However, she did not sound too enthusiastic when addressing Nordic prime ministers last week. “Globalisation and the unlimited flow of capital have shown their dark side. We must make sure the interest of the public . . . is not sacrificed for globalisation,” she said.
Mr Sigfusson, meanwhile, is openly reluctant. “A decision on the euro will not lead to a miracle. We have to prove we are tidying up our own house first.”
The confusion is unlikely to fade quickly. The new government was appointed on February 1st after the former right-wing administration, led by the Independence party, collapsed. It was given just 82 days to rule before a general election on April 25th.
A pre-election resolution of the EU issue is unlikely as it would risk eroding parties’ support.
“We have agreed that this issue will not be solved in the interim period,” said Mr Sigfusson.
The government has indicated, however, that it will hold a referendum on membership after the election, although this may also fail to bring clarity.
But the dithering and electoral jockeying is not going down well with the business community.
“Consensus on the issue is still lacking, but everyone agrees uncertainty is detrimental,” said Finnur Oddsson, of the Icelandic Chamber of Commerce.
“There needs to be a vision for where policy is headed. For many, the right course to pursue is the EU and adoption of the euro. The current situation hampers the operation and growth of international companies in Iceland.”
Pro-EU lobbying by the business community is understood to be intensifying. One observer said the government would have little choice but to listen. "If 65 per cent of your GDP calls up and says let's talk, you talk," he said. – ( Financial Timesservice)