Iceland : joining EU is not a guaranteed life insurance

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    The widening debt crisis in the European Union has made Icelanders aware that joining the bloc or switching to the euro will not necessarily improve their own crisis-struck economy, the country’s finance minister says.

    “When EU countries are faced with difficulties such as Ireland is now, it draws attention to the fact that joining the EU is not a guaranteed life-insurance,” Steingrimur Sigfusson told AFP late Wednesday.

    Iceland began negotiations to join the EU in July, a year after the small island-nation of 320,000 people submitted its application in the wake of a financial crisis that decimated its banking sector and fuelled initial public support to seek out the EU’s economic security.

    But the debt crisis stalking Europe and the euro could cool Icelanders’ eagerness to join the club.

    “Whether Ireland’s situation will influence the general consensus of Icelanders and their will to join the EU and take up the euro is hard to predict but surely this news will have some affect,” Sigfusson said.

    He pointed out there were both “positives and negatives when it comes to the euro.

    “In many ways, the Icelandic krona has been good to us during our economic hardship,” he said, pointing out that the weakening currency had helped boost exports that “have been a significant help in evening out a downward economic slide.

    “I think having the krona has been helpful for us and … unemployment would very possibly be a lot higher without the krona,” he added.

    Iceland’s unemployment rate jumped from one percent in 2007 to eight percent in 2009, a year after its once-booming financial sector ground to a halt when the major banks collapsed.

    At the same time, Sigfusson pointed out, not being part of the eurozone had had negative effects when it came to the accumulation of foreign debt.

    And he stressed, in the case of euro countries like Ireland, that it remained unclear “whether or not having a currency other than the euro would have saved” them.

    That “is much harder to predict,” he added.

    According to recent polls, most Icelanders are in favour of continuing

    EU-membership negotiations but the naysayers have been boosted in part by Iceland’s tough negotiations with EU members Britain and the Netherlands over compensation for British and Dutch savers who lost their savings in the failed Icelandic online bank Icesave.

    Disagreements with the bloc over fishing rights and Iceland’s whaling has also soured some to the idea of becoming a member.

    Reykjavik, Nov 25, 2010 (AFP)