Twice is the charm? On Iceland’s Relations with the European Union

At first glance, Iceland appears to be a model candidate for membership of the European Union: a prosperous Nordic state, one of the best-functioning democracies in the world, and a member of many allied or integration organisations such as NATO, the European Economic Area (EEA) and the Schengen Area. In the past, much suggested that the path to accession could be rapid. After obtaining candidate status, Reykjavík closed successive negotiating clusters relatively quickly, but after only three years the talks were suspended. For nearly a decade the membership issue seemed closed, yet after 2022 a clear revival of pro-European sentiment was observed in Icelandic society. In early March this year, the government of Prime Minister Kristrún Frostadóttir set the date of the referendum on resuming accession negotiations for 29 August, leaving the membership question in the hands of the Icelandic people.

At first sight, the membership of Iceland—an island in the far North Atlantic with a population comparable to that of Szczecin—in the EU may seem of little importance; yet the outcome of the referendum could have far-reaching consequences for the future of the entire Community.

The first attempt to join the Community

Before 2008 the question of support for Iceland’s membership of the European Union divided the political scene along the main axis of dispute. The ruling conservative coalition of the Independence Party and the Progressive Party opposed accession, while the largest opposition party, the social-democratic Alliance, called for the opening of negotiations with Brussels. This situation persisted from the 1990s until the 2007 parliamentary elections, after which the Alliance replaced the Progressive Party as coalition partner of the Independence Party in the government of Geir Haarde, although the Prime Minister himself remained a determined opponent of EU membership.

The turning point came with the global financial crisis of 2008, which hit Iceland’s banking sector and currency particularly hard. Politicians of the Alliance, led by the new Prime Minister Jóhanna Sigurðardóttir, presented the prospect of joining the EU and adopting the euro as a rapid way out of the crisis. They also floated the vision of accession together with Croatia as early as 2011 (Croatia ultimately joined two years later), which, given the country’s high level of development and integration with the economies of EU member states, did not seem entirely unrealistic. After the early elections of 2009 and the social democrats’ victory, in order to start negotiations as quickly as possible the government decided to obtain parliamentary approval for the membership application rather than hold a nationwide referendum. Although this decision caused some controversy, the vote in the Althing ended in victory for the pro-accession camp. The very next day, on 17 July 2009, Iceland formally applied for membership of the European Union. Less than a year later, in June 2010, the EU granted Iceland official candidate status and opened accession negotiations the following month.

The 2010–2013 negotiations. What went wrong?

The plan for rapid accession to the Community proved almost immediately impossible to realise. Even before candidate status was granted, in January 2010 a dispute erupted between Iceland on the one hand and the United Kingdom and the Netherlands on the other over Icesave, a subsidiary of the Icelandic Landsbanki. After the bank’s collapse, foreign account holders lost the savings held there, and the affected states demanded compensation from Reykjavík. This required controversial changes to Icelandic law that were successively rejected by the public in referendums. In subsequent years the matter was eventually resolved through the courts. London and Amsterdam maintained their support for Iceland’s EU membership, yet the accession process was slowed.

Owing to the high degree of alignment between Icelandic and EU legislation, the negotiations progressed smoothly. At this stage, however, it is impossible to overlook the most important point of contention in the relationship—the Common Fisheries Policy (CFP). Fishing is one of the most important sectors of Iceland’s economy and a significant element of national identity. Under Reykjavík’s nominal control lies a vast exclusive economic zone, and the restrictions under the CFP provoke resistance in communities dependent on the export of fish and seafood. No agreement was reached on this issue. Other contentious matters included agriculture and whaling.

The lack of progress on the key issues from Iceland’s perspective began to dampen pro-European sentiment on the island. Eurosceptics were further encouraged by the fact that Iceland had emerged from recession without joining the Community. After the Alliance’s defeat in the 2013 elections and the return to power of the conservative coalition of the Independence Party and the Progressive Party, the accession negotiations were suspended—officially pending a referendum on the matter. In March 2015, however, Iceland formally decided that it would not continue the negotiations and should no longer be regarded as a candidate country, although it never formally withdrew its membership application. In the following years Icelandic politicians focused on domestic affairs, and public appetite for joining the European Union clearly waned.

The revival of pro-European sentiment and the path to the referendum

The question of EU membership returned with the intensification of the security debate after Russia’s full-scale invasion of Ukraine. As early as 2022 the then pro-European opposition tried to push a referendum on the issue through parliament, without success. The situation changed after the November 2024 parliamentary elections, following which the social-democratic Alliance returned to power. The party, under the leadership of the new Prime Minister Kristrún Frostadóttir, formed a coalition government, and two of its three constituent parties had campaigned for the resumption of negotiations with Brussels. As a result of the intensifying domestic debate, growing geopolitical uncertainties around the Arctic region, and the chaotic foreign policy of Iceland’s most important ally to date, the United States, the referendum process accelerated. An additional impulse came from the actions of the Donald Trump administration, such as threats to annex nearby Greenland, the imposition of high tariffs, and the remark by US Ambassador Billy Long that Iceland should become the “52nd state.”

In March 2026 Prime Minister Frostadóttir announced that the referendum on resuming accession negotiations would take place on 29 August. She added that it would be a two-stage process. If the pro-European option prevailed and the talks with Brussels concluded successfully, a second referendum would be held on Iceland’s final accession to the European Union. The final decision on the date of the vote was taken by parliament on 28 May.

The referendum debate

Although foreign press coverage of the referendum is dominated by geopolitical issues surrounding the Arctic region, the actions of the United States under Donald Trump, or EU policy, on Iceland itself the debate has been largely dominated by domestic concerns. The greatest controversies continue to revolve around the CFP, which could significantly limit Icelanders’ control over their domestic fishing industry. From the perspective of EU member states this may seem a minor matter, yet one must understand the enormous importance that fishing and freedom of navigation hold in Icelandic national heritage—Icelanders successfully fought the United Kingdom for fishing rights during the so-called Cod Wars of the 1950s and 1970s. Reykjavík is skilfully exploiting geopolitical pressure on this issue, and the current Commissioner for Fisheries and Oceans, Kostas Kadis, has signalled openness to compromise and the possibility of creating special provisions that would grant Iceland greater rights in this area than other member states. Important themes also appearing in the debate include: political sovereignty, the fight against rising living costs, adoption of the euro, agriculture, and security—both the US threats towards Greenland that undermine the credibility of American guarantees, and Russia’s growing activity in the Arctic region.

The Icelandic political scene is deeply divided on the question of resuming negotiations with Brussels, a division visible even within the ruling coalition. The social-democratic Alliance of Prime Minister Kristrún Frostadóttir and the liberal party Viðreisn of the current Foreign Minister Þorgerður Katrín Gunnarsdóttir form the core of the pro-European camp, but the third coalition partner, the centre-left populist People’s Party, openly opposes renewed accession talks. The parliamentary opposition is united on this issue—both the conservative Independence Party, the right-wing Centre Party and the agrarian Progressive Party advocate a “No” vote. They are echoed by the left-wing opposition that failed to win seats in the Althing in the last elections, namely the Icelandic Socialist Party and the Left-Green Movement, which had been a member of the previous governing coalition. The Pirate Party expresses neutrality.

If the polls are to be believed, public opinion is divided roughly half and half, with a slight advantage for supporters of a return to negotiations. In most surveys, however, the results remain within the margin of statistical error, so until the vote is concluded the final outcome cannot be taken for granted.

Possible consequences for the European Union

Does a referendum in small Iceland, with a population smaller than that of any EU member state and an economy larger only than Malta’s, have any significance for the future of the Community? It turns out that it may have enormous significance.

It is worth recalling that the European Union last admitted a new member, Croatia, in 2013, having lost the United Kingdom along the way. For more than 13 years the process of enlarging the Community has remained de facto frozen, and the negotiations currently under way—mainly with the countries of the Western Balkans—are progressing at a snail’s pace. Unlike other candidates, in Iceland’s case no far-reaching reforms would be necessary. The island enjoys a stable economic situation, possesses well-functioning and deeply rooted democratic institutions, and its policies are already aligned with the European Union on many fronts. According to estimates, Iceland has adopted around one-third of EU legislation, mainly within the framework of its EEA membership. Unlike in 2010–2013, Brussels now appears far more willing to work out compromises on the most pressing issues, particularly Icelandic fisheries. Although the clusters closed so far would require a fresh review, much indicates that the process would proceed without major difficulties.

Smooth negotiations with the government in Reykjavík could provide a strong impetus for a return to the European Union’s enlargement policy. In order not to create a situation in which Iceland was seen as having been given priority treatment, Brussels would probably accelerate accession talks with countries that have been waiting for years, such as Montenegro, Albania or North Macedonia. The accession of a wealthy Nordic country could be used to demonstrate that the European Union remains an attractive organisation that continues to attract new members and still possesses the political will to do so. In addition, a victory for the pro-European option in the referendum could translate into a revival of appetite for joining the Community in another Nordic state—namely Norway, where opinion polls already show an upward trend among supporters of EU membership.

A majority for “No” would most likely close the question of Iceland’s accession to the European Union for the foreseeable future. For the country this would mean maintenance of the status quo, but also continued dependence for its security on an increasingly unpredictable NATO led by the United States, and a lack of influence over the making of EU law that it largely adopts anyway. For the Community such an outcome would probably freeze the enlargement agenda for further years, if not decades. Strengthening eurosceptics could use the result to present the EU as a weakening and unattractive organisation for prosperous countries that is sinking into stagnation. And why participate in a project doomed to failure? It would be powerful propaganda ammunition. Owing to its location, Iceland constitutes an important element of the increasingly significant Arctic region, and its absence from EU structures would hinder the expansion of influence by member states in that area.

The result of Saturday’s referendum may be decided by a proverbial whisker and, regardless of the outcome, will generate considerable emotion both in Iceland and across Europe. We will probably know the outcome by 30 August, which could open an intensified discussion about the future of the European Union. It is worth taking a moment that day to familiarise oneself with the results, if only via the official Icelandic government websites.