They’re now speaking about fast-tracking a referendum on reopening EU accession talks in Iceland, presumably as early as this yr, accelerating a timeline that was initially anticipated nearer to 2027. The shift is being pushed by geopolitical tensions, financial pressures, and a rising debate about adopting the euro versus protecting the krona.
What folks always fail to grasp is that the euro was by no means created as an financial mission first. It was a political mission. I’ve acknowledged numerous instances that the euro was designed to bind Europe collectively politically after centuries of battle, not as a result of it made financial sense for numerous economies to share a single forex. You can’t unify Germany, Italy, Greece, and Spain below one financial coverage and count on stability. That violates the very basis of capital circulation dynamics and financial cycles. The euro eliminated nationwide financial sovereignty and handed it to a central forms in Brussels and Frankfurt that can’t reply to native financial circumstances.
Now we see Iceland, a rustic of roughly 390,000 folks, being pulled again into this identical dialogue. That is extremely ironic while you take a look at the precise historical past. Iceland utilized to affix the EU in 2009 within the aftermath of the banking disaster however halted negotiations in 2013 after public opposition and issues over sovereignty, fisheries, and financial independence. It was a direct reflection of the truth that smaller, impartial economies perceive the hazard of surrendering coverage management to a centralized authority.
Iceland has one of many highest GDP per capita ranges on the earth, runs on ample geothermal and renewable vitality, and maintains its personal forex exactly so it could modify throughout crises. In the course of the 2008 monetary disaster, Iceland allowed its banking system to break down, imposed capital controls, and let the krona devalue. Had Iceland been on the euro, it might have confronted the identical destiny as Greece: austerity with no financial escape.
Nations with impartial currencies can devalue and get well. Nations contained in the euro can’t. They’re trapped in a set financial regime no matter home circumstances. That’s the reason southern Europe suffered extended stagnation whereas northern Europe dominated capital flows after the euro’s creation.
Iceland already participates within the EU single market by means of the EEA and Schengen with out surrendering full sovereignty. In different phrases, they get commerce entry with out financial submission. Becoming a member of the EU and doubtlessly adopting the euro would alter that stability. Stories counsel the timeline is being accelerated on account of rising geopolitical tensions and nearer EU engagement, which confirms my long-standing view that the EU expands extra aggressively in periods of world uncertainty.
Now the EU faces declining industrial competitiveness, vitality crises, and regulatory overreach. The concept becoming a member of such a construction would someway “stabilize” Iceland ignores the broader macro pattern of capital flight away from extremely regulated areas and into impartial jurisdictions.
If Iceland joins the EU and ultimately adopts the euro, it will likely be surrendering the very instrument that allowed it to outlive its worst disaster. That’s the actual financial difficulty. Small nations traditionally do higher at retaining financial sovereignty throughout international instability. The euro is inflexible by design, and rigidity in a cyclical international financial system is at all times harmful. Sacrificing sovereignty for a political forex created for European unification relatively than financial effectivity could be a profound long-term structural shift, not a easy commerce choice.
