I

ICELAND played little part in European developments during the first two decades following the Second World War. It joined the European Free Trade Association (EFTA) only in March 1970. The following November it began talks with the European Communities (EC) along with the other nonapplicant EFTA states, and formal negotiations began the following year. These were hindered by Iceland’s unilateral decision in 1972 to expand its territorial fishing limits to 50 nautical miles (93 kilometres). Although a free trade agreement was ratified in February 1973, the EC insisted that a satisfactory settlement of the fishing dispute had to be reached before Iceland would be allowed to obtain the full benefits of the Agreement, and an acceptable compromise was not reached until July 1976. After this, there were no significant qualitative changes in the relationship with the EC until the late 1980s, when discussions, followed by negotiations, on the European Economic Area (EEA) began. This arrangement satisfied Iceland’s desire for access to the internal market. Hence, unlike most of its EFTA partners, Iceland did not apply for EC membership. Successive Icelandic governments remained rather sceptical on the subject of European Union (EU) entry. This attitude did not, however, prevent relations with the EU from developing further. Iceland, along with Norway, negotiated participation in the Schengen Agreement and regularly associated itself with EU positions adopted as part of the common foreign and security policy. The economic and financial turmoil unleashed in late 2008 had a heavy impact on Iceland, were banks had severely overstretched themselves on capital and bond markets. The crisis and ensuing credit crunch shook the economic and political infrastructure of Iceland to its core, toppled the Government and led Iceland to consider for the first time the possibility of EU membership. A new centre-left (Social Democrats and Greens) coalition Government, formed after elections in April 2009, was determined to bring the issue before parliament for debate. In July, after intense debate, the Icelandic parliament voted in favour (33 votes to 28, with two abstentions) of initiating the process for EU membership. The application was submitted later that month. The application was generally welcomed within the EU, although it was clear that accession was not a foregone conclusion. The period prior to the Commission’s generally positive avis in February 2010 was overshadowed by a dispute with the United Kingdom and the Netherlands over the level of compensation that Iceland should pay British and Dutch investors in the collapsed Icesave bank. Iceland opened accession negotiations

in July 2010, but these proved to be far more protracted than had been assumed despite Iceland’s already close integration with the EU through the EEA. Negotiations over fishing and the common fisheries policy were expected to be particularly problematic. Added to this, popular support in Iceland for membership began to decline following the application, raising the question of whether any successfully negotiated accession treaty would be passed in a referendum. Negotiations continued, however, although by mid-2012-the Icelandic Government’s original target date for accession-only 10 of the 35 negotiating chapters had been closed.